27 - 31 July 2015
A look at local and international economic data, major events, economic releases and company news expected in the week to come.
By Shaun Murison, Market Analyst
Commodity prices have been battered and bruised over the last week as strong U.S. data (and in turn dollar strength) and Chinese demand concerns weigh on sentiment. The extent of the rout in commodities has been evidenced in results and operational updates released from miners populating the decliners list.
Kumba Iron Ore has traded to new multi-year lows following its results release, compounding the negative influence of weaker underlying resource pricing over the course of the week. Normalised earnings (excluding one off items) fell by a massive 52% against the comparative interim reporting period in 2014. The huge drop in the iron ore index to an average price of $60/tonne (in the last six months) was the major contributor to the drop in earnings. Kumba is now targeting a production price of $45/tonne through cost saving initiatives to further improve operational efficiencies. The company has also decided not to pay a dividend with the aim of further preserving cash.
Anglo American Platinum had a much-improved first half of the year in which net sales revenue increased by 7% while headline earnings added a massive 1474% against the prior half-year comparative period. The improvement in earnings does however follow a low base of comparison in that the comparative period was negatively affected by prolonged industrial action.
Anglo American Plc's results highlighted a difficult interim period in which earnings per share dropped by 30% against the comparative 6 months in 2014. The 70c (US) EPS figure was however ahead of consensus. The 32c (US) per share interim dividend was maintained at the same level as the previous half-year.
The move to maintain the dividend is a little surprising as both subsidiaries Amplats and Kumba have announced that they would not be declaring a dividend in this interim period.
BHP Billiton released an operational review in which it was noted that group production increased by 9%. Production increases were noted in Petroleum (4%), Western Australia Iron Ore (13%), and Metallurgical Coal (13%), while copper production remained unchanged.
Vodacom released a Q1 2016 trading update in which the following was noted:
Headline Consumer Price Index (CPI) data for South Africa showed inflation to be at 4.7% annualised in June 2015. Despite the figure remaining within the reserve banks targeted range (as it has for the past few months), the repo rate increased by 0.25% at this week’s Monetary Policy Committee (MPC) meeting.
Reserve Bank Governor, Mr Lesetja Kganyago, increased the repo rate to 6% citing upside inflationary risks as motivation thereof. Cost-push catalysts such as the Greek crisis, U.S. monetary tightening, commodity price weakness as well as Chinese equity market uncertainty were among the risks referred.
The GDP growth forecast was revised lower to 2% (from 2.1% at the last MPC meeting), while the current account deficit is expected to be around 4.6% of GDP for the year.
In Europe, Greece parliament approved the EU conditions in lure of accessing bailout funds and remaining part of the euro. French and German manufacturing PMI data both fell short of consensus estimates, with the French data also alluding to minor industry contraction.
In the U.S., weekly jobless claims data was reported at a multi decade low with 255000 people filing for unemployment benefits (est. 279000). Crude oil inventory data showed that 2.5m commercial firms held more barrels of oil in the past week (est. -1.7m).
The week ahead
As global growth remains an essential market theme at present, markets will pay close attention to Preliminary GDP data out of the U.K. on Tuesday and Advance GDP data out of the U.S. on Thursday in the upcoming week. Also of increased significance (U.S.) will be the Federal Open Market Committee statement and rates announcement on Wednesday evening.
|27-Jul||10:00||EUR||German IFO business climate||107.6||107.4|
|27-Jul||14:30||USD||Core durable goods orders m/m||0.40%||0.00%|
|28-Jul||10:30||GBP||Prelim GDP q/q||0.70%||0.40%|
|29-Jul||20:00||USD||Federal funds rate||<0.25%||<0.25%|
|30-Jul||14:30||USD||Advance GDP q/q||2.50%||-0.20%|
Source: Economic Calendar, as of 24/07/2015
Attend one of our free Trading strategy and Market update seminars, and with the help of our experts refine your trading strategy.
|29-Jul||18:30||Stellenbosch, Protea Hotel Techno Hotel||Register here|
|30-Jul||18:30||Cape Town, The Westin||Register here|
|12-Aug||18:30||East London, Premier Hotel Regent||Register here|
|13-Aug||18:30||Port Elizabeth, Radisson Blu||Register here|
|26-Aug||18:30||Johannesburg, IG offices||Register here|
|27-Aug||18:30||Pretoria, Centurion Country Club||Register here|
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 24/07/2015
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.