The Week Ahead 20 March

20 March 2014

Our regular look at the news making the headlines, using our market insight information and analysis tools.

By Shaun Murison, IG Market Analyst

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Company announcements


Economic catalysts

Market overview

It has been a turbulent week for financial markets as the market continues to temper fears associated with Russia and Ukraine, a Chinese economic slowdown and further stimulus tapering by the US Federal reserve.

Local Data

Inflation as measured through the Consumer Price Index (CPI) rose 5.9% annualised in February 2014. The data is once again testing the outskirts of the targeted 3% - 6% range of the reserve bank, which was slightly higher than consensus forecasts had predicted.

Retail sales figures reported were significantly better than expectation. An annualised growth in January of 6.8% was recorded, which is the fastest growth within the sector for almost 18 months.

Non-farm payroll data showed a 0.5% annualised improvement in employment for the fourth quarter of 2013. This is a slight acceleration in non-farming employment growth from the preceding quarter.

On Thursday, the Monetary Policy Committee (MPC) meeting will see reserve bank governor Gill Marcus deliver the rates decision and assessment of the current economic climate. No change in current lending rates are expected, however consensus forecasts do predict further tightening as the year progresses.

International Data

Economic data out of the US has been relatively upbeat this week with industrial production, building permits, current account and unemployment claims data all beating expectation. However all eyes were on the Federal Open Market Committee (FOMC) meeting as Fed Chairperson Janet Yellen addressed the public.

A further $10bn reduction of the current asset purchasing program was announced at the meeting, with $5bn of mortgage backed securities and $5bn of treasury purchases being affected. It was also suggested that lending rates in the US could start to rise as early as March 2015, should economic conditions permit.

The most noticeable reaction to the FOMC news was strengthening of the US dollar, and in turn softer commodity prices. Spot gold has now retraced from around $1380/oz early in the week to $1325/oz in the later part of the week.

Source: IG Insight, as of  20/03/2014 16:30

Top movers

Source: IG Insight, as of 20/03/2014 14:05

This week we witness the worst performers shed a greater percentage than our best performers gained, indicative of a week dominated by negative sentiment.  

Naspers continues to respond to a declining Tencent holdings share price which is attributable to the bulk of Naspers earnings.  Last week we saw the Chinese central bank halt mobile payments from the scanning of barcodes which significantly affect companies such as Alibaba and Tencent. This week Tencent released a fourth quarter update showing strong sales growth, although gross profit margins declined.

Harmony Gold, along with its local gold mining counterparts, underperformed this week due to a significantly lower gold price. Dollar denominated gold has reacted negatively to what appears to be easing tensions in the Cremea region, as well as news that the FOMC had decided to further reduce the rate of the current asset purchasing program in the US. 

MTN leads the top gainers list this week on the eve of its dividend. The company has been particularly strong since its recent results release and optimism around network roaming and management services agreement talks which are currently underway with Telkom. ICASA, South Africa’s communication regulator, has said it will review the decision to cut termination rates. The originally prescribed rate cuts would negatively affect the larger providers, MTN and Vodacom, whilst initially benefiting smaller providers such as Telkom Mobile and Cell C.   

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