20 - 24 October 2014
Our regular look at the news making the headlines, using our market insight information and analysis tools - now with online videos and tutorials.
By Shaun Murison, Market Analyst
A volatile week has seen our local bourse take directional guidance predominantly from major international markets, as global market correlations become more synchronised amidst fears surrounding deflation and slowing global growth.
Retail trade sales, measured at constant 2012 prices (real terms) increased by 2.1% year-on-year (yoy) in August 2014. The highest annual growth rates were recorded for retailers in hardware, paint and glass (+4.6%) followed by general dealers (3.4%).
Measured in nominal terms (current prices), motor trade sales increased by 1.8% yoy in August 2014. The highest annual growth rates were recorded for convenience store sales (7.2%), workshop income (7.0%) and fuel sales (4.7%). Wholesale trade sales (measured in real terms) decreased by 2.2% (yoy) in August 2014.
This week we have seen elevated volatility with weakness catalysed primarily by German data (once again). The ZEW Economic sentiment reading of -3.6 showed that institutional investors and analysts are currently pessimistic on the German economic health outlook. Sentiment was further hampered after the German government downgraded their expectation for GDP growth significantly. The forecasts for growth have been reduced to 1.2% in 2014 (from 1.8%) and 1.3% in 2015 (from 2%).
In the U.K., the unemployment rate dropped to 6% and 18 600 less people claimed unemployment benefits in September 2014.
Key data points to watch in the upcoming week will be Manufacturing and services PMI data out of the Eurozone on Thursday, 23 October and preliminary GDP data out of the U.K. on Friday, 24 October.
In the U.S., data has been mixed with weak retail and core retail sales disappointing markets with a 0.1% and 0.2% month-on-month contraction respectively. In the latter part of the week strong data helped improve global sentiment as industrial production (m/m), jobless claims (weekly) and Philly Fed Manufacturing data all came in ahead of expectation.
In China, trade surplus of $31 billion was reported for September 2014, less than expectations of $41.2 billion. Consumer Price Index (CPI) showed year-on-year inflation to be at 1.2%. (GDP) data set for release on Tuesday 21 October and should be a particularly important data point in line with the current unease around global growth.
Volatility in equity and bond markets is now reaching their highest levels in years. The movements in our benchmark Top40 index on Thursday perhaps illustrate this volatility best. The more than 1 000 point intraday journey was realised in both directions highlighting an epic battle between bull and bear.
Much like a steel wire being bent back and forth, eventually it will snap in one direction or the other. In the case of our local index, the break has now occurred to the upside, suggesting capitulation in short-term market weakness and in turn long awaited relief.
The top gainers list shows a resource dominant week, as those miners dependant on earnings from iron ore outperform their fellow blue chip counters. The underlying price of the steel making ingredient surged more than 4% on Monday, following trade balance data from China which revealed a 13% increase in iron ore imports in September 2014.
The increase in the spot price of iron ore does however come from a low base after the metal reached its lowest level in 5 years just last month. Assore, Kumba, African Rainbow Minerals and Exxaro (invested in Kumba’s Sishen Iron Ore operations) have all had a torrid few years and perhaps this week’s gains start to show far sighted investor appeal at current (still depressed) levels.
The top decliners list doesn’t fully reflect the true extent of the midweek market brutality of broad-based weakness, as the rebound in the latter part of the week gained traction.
A SABMiller trading statement witnessed a company specific catalyst (rather than correlation to global market weakness) drive its share price lower. The statement showed that, in the interim period, beer volumes declined by 1% as Chinese and Australian volumes were soft (particularly in Q2). Currency fluctuations were also noted as being unfavourable, negatively impacting results for the interim period.
The next batch of videos will be about IG’s chart offering. IG gives you integrated access to the leading web-based, advanced charting package ProRealTime charts.
These charts are advanced, reliable and tradable. You are able to test your trading strategies with ProBackTest and you have access to 100 indicators, historical data and more.
Attend one of our free Trading strategy and Market update seminars, and with the help of our experts refine your trading strategy.
|29 October 2014||18:30||IG Offices, Johannesburg||1.5hrs|
|30 October 2014||18:30||Pretoria Country Club, Pretoria||1.5hrs|
|19 November 2014||18:30||Southern Sun Elangeni & Maharani, Durban||1.5hrs|
Follow one of the links below for a quick look at our web-based platform and the range of markets on offer.
IG provides an execution-only service. The material on this website does not contain (and should not be construed as containing) investment advice or an investment recommendation, or a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of the above information. Consequently any person acting on it does so entirely at his or her own risk. The research does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. This communication must not be reproduced or further distributed. The price levels provided are derived from ProRealtime Charts (IT-Finance)
Source: INET BFA, as of 17/10/2014
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.