Market movements have been surprisingly subdued this week, despite a relatively busy economic calendar.
Real GDP for the fourth quarter of 2013 increased at an annualised rate of 3.8% compared with 0.7% in the third quarter. The manufacturing industry provided the strongest contribution to growth over the period followed by the mining and quarry industry.
Headline Producer Price Index (PPI) data showed an annualised percentage change of 7% in January 2014 for final manufactured goods. The figure was higher than the consensus of forecasts at 6.8% and the previous months reading at 6.5%.
Finance minister Pravin Gordhan delivered the 2014 budget on Wednesday 26th of February, where GDP has been forecast to grow 2.7% this year while CPI is expected to average at 6.2%
South Africa’s trade deficit widened to R17.1bn in January 2014, from R4.31bn the previous month. The most noticeable short-term reaction was that of the rand, which started to give back a portion of this week’s gains following the data and trading at R10.72 at the time of writing.
In the US, the CB Consumer Confidence Index reading missed estimates and was lower than the previous months figure. The index is considered to be a leading indicator of consumer spending and in turn economic activity.
Weekly unemployment claims data showed 348 000 people filed for unemployment insurance for the first time last week, 15 000 more than what was expected.
Monthly Core durable goods orders showed 1.1% growth in January, providing optimism over future manufacturing activity increasing.
New home sales figures were strong showing an annualised 468 000 new houses sold in January 2014.
In a turn of events, resource counters have underperformed this week, while financial counters have found renewed strength amidst positive earnings guidance.
The financial sector has rebounded sharply after a weak start to the year. Nedbank released positive results this week (HEPS +15.9%), which was followed by a strong trading statement from Firstrand (HEPS expected 20% - 22% higher). The earnings updates continue Barclays Africa Group's much improved results reported recently.
Massmart headed up the gainers list after full year results revealed a 26% increase in operating profit, a 29% increase in headline earnings and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) growing by R2.9bn (9%).
A voluntary trading statement ahead of the company’s interim results witnesses Aspen’s share price gaining ground. Headline earnings and earnings per share for the six month period ending 31 December 2013 are expected to be 12% to 16% higher, while diluted headline earnings per share from continuing operations is expected to be 20% to 24% higher.
The resource sector finds itself retracing significantly off recent highs, as the rand claws back its strength and strike action in the platinum sector enters its sixth week. After a strong run as we have seen within the sector, it is natural for market participants to find excuse to lock in profit. However, the sharp sector decline does bear an uncanny resemblance to last year’s sector performance, in that gains were witnessed into mid-February before a lackluster performance followed for the remainder of the year.
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