3 - 7 November 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
This week’s market rebound has been catalysed for the most part by global market occurrences which have equated to a general improvement in risk appetite amongst investors.
Third quarter labour data for 2014 showed 22000 pax increase in employment and a 3000 pax decrease in unemployment over the period. The unemployment rate improved marginally from 25.5% in the second quarter to 25.4% in the third. The construction sector was recorded as providing the largest employment growth.
Trade balance data showed the trade deficit in South Africa to have narrowed from R16.3 billion in August 2014 to R2.9bn in September 2014. Exports increased by 18% in September while imports grew marginally by 1.4% over the period.
Producer Price Index data (PPI) showed Inflation at a factory level to be at 6.9% (y/y) in September from 7.2% in August.
Positive market catalysts this week were realised from all corners of the globe. The improved market sentiment this week, began with a better than expected outcome from the stress tests conducted by the European Central bank (ECB) on commercial European Banks. In the U.S., GDP data highlighted firm economic growth out of the region of 3.5%, helping ease concerns around slowing global growth (for the time being).
The Federal Open Market Committee Meeting (FOMC) announced the end of tapering to its bond purchasing program while alluding to the interest rate tightening cycle remaining data dependant. Further market favour was found at the tail end of the week from news that the Bank of Japan had unexpectedly boosted stimulus measures within the region.
A positive week on our Top 40 cash index has followed global market buoyancy, providing much needed relief from the recent correction (more than 12%) markets have endured. The rebound would place a cautious optimism that the correction has reached a point of capitulation and perhaps we could now see continued gains into the new year.
Traders using a charting bias to their decision making process, would warn of the inverse head and shoulders formation evident on the Top 40 cash index. The pattern highlights a logic that the price activity has now moved from a series of lower highs and lower lows (downtrend) to a series of higher highs and higher lows (an uptrend). The pattern would anticipate a further 6% gain in the short to medium term on the aforementioned index.
The renewed appetite for risk on our local market has shown a preference towards banking and retail counters as they lead this week’s gains.
Local banks have perhaps leveraged off of the positive sentiment induced by the ECB banking stress tests while retail counters have been met with favourable reactions following better than expected earnings updates from the likes of The Foschini Group and Shoprite Holdings.
Shoprite Holdings finds itself heading up the gainers list after it reported a 12.3% increase in revenue against last year’s comparative, quarter achieving a sturdy 11.9% increase in domestic sales despite current pressured domestic consumer environment.
Thursday night’s Federal Open Market Committee (FOMC) statement was the initial catalyst to hamper the resource sector’s performance this week. Investors who had been hopeful that the U.S. Federal reserve bank may stagger the final taper of its asset purchasing program were disappointed as this was not to be and the end of quantitative easing became a reality.
The U.S. dollar immediately found strength following the news and in turn commodity prices became pressured. Spot Gold was hardest hit, a move which was further exacerbated after U.S. GDP data showed 3.5% growth, reducing safe haven demand for the precious metal in the near-term.
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|19 November 2014||18:30||Southern Sun Elangeni & Maharani, Durban||1.5hrs|
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Source: INET BFA, as of 31/10/2014