2 - 6 February 2015
A regular 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
The end of the week brings the end of the month and we take a quick assessment of what has materialised in our top blue chip movers over the first month of 2015. At first glance we can see that the trend bias has shifted to the positive as the extent of gains far outweighs the extent of losses.
AngloGold Ashanti, the last gold counter remaining in the Top40 index, has significantly outperformed, magnifying gains in the underlying price of the precious yellow metal while the rand remains at an elevated level of weakness against the greenback. Deflationary fears have spurred new rounds of global economic stimulus and in turn safe haven demand for gold. Gold has further benefitted from the expectation that the U.S. may extend the timeframe in which interest rates remain accommodating.
Retailers Mr Price and Woolworths reaffirmed their respective dominance in terms of investor preference as the shares outperform within the retail space as well as the broader market. Retailers (in general) have found renewed positive sentiment following the dramatic drop in oil, which has fuelled the assumption that consumers will have improved purchasing power. Quick summations of trading updates from within the sector are as follows:
Mediclinic International has rallied on the strong appreciation of the Swiss Franc after the Swiss National Bank abandoned its currency peg against the Euro. Mediclinic which generates more than half of its earnings (as per 2014 FY results) within Switzerland should benefit from the currency exchange when reporting back earnings in rand terms. The rand has experience double digit losses against the Swiss Franc this year.
Anglo American Plc recent share price weakness was exacerbated in January following the sharp downturn in the copper price which added to the recent slump in commodities oil and iron ore in particular. The company released a fourth quarter production update in which the following production changes were reported
Kumba Iron Ore remains out of favour while the steel making ingredient (iron ore) remains in global abundance as supply far exceeds demand. Iron ore was the second worst performing commodity (after oil) falling in excess of 40% in 2014. Global inventories remain at elevated levels hindering the performances of producers at present.
A weak Q3 sales update triggered the initial selling of Richemont shares both locally and abroad before the sharp move in the Swiss Franc saw weakness in the company’s share price compounded. The Swiss luxury goods retailer which has already reported lacklustre sales growth is likely to be negatively impacted going forward from the aforementioned move on the Swiss Franc as export demand is expected to wane and the high level of proportionate costs domiciled in Switzerland impact margins.
|4-Feb||Resilient Property Income Fund Ltd||Interim Results||N/A|
|4-Feb||Vodacom Group Ltd||Q3 Results||N/A|
|4-Feb||Twitter Inc||Q4 & FY 2014||N/A|
The South African Reserve Bank’s (SARB) Monetary Policy Committee meeting brought little in the way of surprises as lending rates remained unchanged (repo rate 5.75%). The dramatic drop in oil has eased inflationary concerns in the near-term as noted by Consumer Price Index (CPI) in December falling to 5.3%, half a percentage from the preceding month, aiding the decision to further the date at which continued monetary tightening will resume.
Reserve Bank Governor, Lesetja Kganyago, expects inflation to fall to 3.8% in 2015, significantly lower than the Reserve Banks’ previous forecast of 5.3%.
In Europe, “anti-austerity” political party, Syriza, were the victors at the Greek Parliamentary election. Alexis Tsipras, leader of Syriza eased concerns surrounding a Greek exit from Euro as he reaffirmed his commitment to the currency. Recent European Central Bank (ECB) stimulus actions perhaps found further justification in the week, as CPI flash estimate data suggested 0.6% deflation y/y in the Eurozone.
The Federal Open Market Committee (FOMC) kept current lending rates at record lows in the U.S. Federal Reserve Chairperson Janet Yellen in her address reaffirmed that the central bank would continue to exercise patience in terms of when the tightening cycle would commence. The Federal Reserve remained upbeat on the progress of the labour market and economy, although Q4 Gross Domestic Product (GDP) data fell short of consensus estimates with q/q growth reported at 2.6%.
The week ahead
The new week will see little in the way of scheduled data domestically to guide markets, although Gold and Foreign exchange reserves are set to be reported in the latter part of the week by the SARB. Arguably the most important data point of each new month, the U.S. will release non-farm employment data on Friday accompanied with the regions unemployment rate information.
|2-Feb||03:45||CNY||HSBC Final Manufacturing PMI||-||
|2-Feb||17:00||US||ISM Manufacturing PMI||-||55.5|
|4-Feb||15:15||US||ADP non-farm employment change||-||241000|
|4-Feb||17:00||US||ISM Services PMI||-||56.2|
|5-Feb||14:00||UK||Lending rate announcement||0.50%||0.50%|
|5-Feb||14:00||UK||MPC rate statement||-||-|
|5-Feb||11:30||SA||Business confidence index||-||88.3|
|6-Feb||15:30||US||Non-farm employment change||-||252000|
|6-Feb||08:00||SA||Gold & foreign exchange reserves gross||-||$49.1bn|
|6-Feb||08:00||SA||Godl & foreign exchange reserves net||-||$42.73bn|
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|11 February||18:30||IG office, Johannesburg||1.5hrs|
|12 February||18:30||Pretoria Country Club, Pretoria||1.5hrs|
|25 February||18:30||Premier Hotel Regent, East London||1.5hrs|
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Source: INET BFA, as of 30/01/2015