The Week That Was
In a mixed trading session following the Thanksgiving holiday, US equities markets saw varied performances.
The S&P 500 remained largely unchanged, while the Nasdaq 100 experienced a modest decline of 0.3%, weighed down by significant losses in major technology companies. This movement reflects the market's ongoing evaluation of recent corporate and economic developments.
The preliminary S&P Global Purchasing Managers' Index (PMI) for the US offered a divergent view of the economic landscape, with the manufacturing sector contracting more sharply than anticipated, contrasting with a more rapid expansion in the services sector.
US Treasury securities, when traded internationally, encountered losses. This negatively impacted major tech companies such as Apple, Meta, and Microsoft, each of which saw their stock prices fall by approximately 1%. Nvidia also saw a 1.8% decrease in its stock price following a Reuters report that the company is postponing the release of a new artificial intelligence chip in China to adhere to US export regulations.
Conversely, the Dow Jones Industrial Average fared better, partly due to its lower exposure to the technology sector. It marginally exceeded the break-even point, culminating in a 1.3% increase for the week. This rise marks the Dow's fourth consecutive weekly gain, the longest such streak since April.
On Friday, the JSE All Share Index in South Africa experienced a positive shift, increasing by approximately 0.4% to close at 75 712, reaching its highest point since mid-August.
This upturn marks a continuation of gains for the third consecutive session. Traders and investors have been attentively following economic data and evaluating the potential direction of interest rate movements, while acknowledging the necessity of maintaining restrictive monetary policies for a sustained period.
Domestically, market participants are still processing the recent monetary policy decision made by the South African Reserve Bank. Governor Lesetja Kganyago conveyed a notably hawkish stance following the release of October's inflation data, which exceeded expectations.
In terms of corporate performance, Sirius led the advancements with a notable 3.1% gain. This was closely followed by a series of significant gains from other companies including Montauk Renewables, Sibanye Stillwater, Old Mutual, Harmony Gold, and MC Group, all registering increases of over 2%.
Overall, the JSE saw a commendable rise of about 2.4% over the course of the week.
The Week Ahead
In the US, key economic reports for October, including personal income and outlays, along with the second estimate of Q3 GDP growth rate and the ISM Manufacturing PMI, will be closely monitored by traders and investors.
The PCE price inflation is expected to show a deceleration to 3.1%, the lowest since March 2021, with the core rate potentially easing to 3.5%, marking a two-year low.
The US GDP growth revision is anticipated to show an increase to 5% from 4.9%, driven by strong consumer spending and solid exports. The ISM data may suggest ongoing contraction in the manufacturing sector. US Fed policymakers' speeches, particularly Chair Powell's remarks on Friday, will be scrutinised for hints about future monetary policy.
Other important data includes new and pending home sales, Case-Shiller home prices, and preliminary figures for goods trade balance and wholesale inventories.
The US earnings season continues with reports expected from major companies like Intuit, CrowdStrike, Workday, Snowflake, Synopsys, Salesforce, VMware, and Dell. Europe's focus will be on preliminary November CPI reports from several countries including Germany, the Euro Area, France, Italy, Spain, the Netherlands, and Poland.
Inflation rates in the Euro Area and Germany are expected to decline. ECB officials, including President Lagarde, will likely shed light on the ECB's monetary policy direction.
The labour market will be in focus with job data from the Euro Area, Germany, France, and Italy. France and Italy are set to release final Q3 GDP estimates, while Switzerland and Turkey will present preliminary figures.
Other significant data includes the Euro Area's business survey, Switzerland's KOF leading indicators, and retail trade figures.
In the UK, the Bank of England's monetary indicators and the CBI distributive trades report will be key points of interest.
In Asia, China will release fresh PMI figures for November.
Japan's economic updates include October’s unemployment rate, retail sales, industrial production, and speeches from key BoJ members.
Lastly, the global oil market is awaiting the outcome of the OPEC+ virtual meeting on 30 November, as the group faces challenges in reaching a consensus on future production levels. Key Themes for the Week Ahead
US inflation data
Traders and investors are looking with anticipation toward the upcoming US inflation report due on Thursday, following October's stable consumer price inflation figures. This report could reinforce expectations that the US Fed might pause its interest rate increases.
November's personal consumption expenditures (PCE) price index, the Fed’s favoured measure of inflation, is projected to show a modest uptick of 0.1%. This follows a consistent 0.4% increase in both September and August.
More telling might be the core PCE index, which excludes the volatile food and energy sectors. This measure is a more reliable indicator of persistent inflation trends and is anticipated to reflect a 3.5% increase from the previous year.
The week is also packed with other significant economic indicators. Tuesday will see the release of November's consumer confidence index; the past month revealed a continuing downtrend for the third consecutive month.
Updated figures for the third quarter GDP will be presented, offering a revised glimpse into the country's economic growth. Additionally, new data regarding October's new home sales will be unveiled, alongside the weekly jobless claims statistics and the Fed's Beige Book, providing a comprehensive overview of the nation's economic conditions across various districts.
Eurozone inflation data
On Thursday, the Eurozone is scheduled to release its latest inflation figures, which are anticipated to show a slight easing in price increases for November.
The forecast suggests that consumer prices have grown by 2.8% over the past year, a marginal decrease from the 2.9% inflation rate reported in the previous month.
The core inflation rate, which excludes volatile elements and offers a closer look at long-term trends, is also expected to decelerate to 3.9%.
Despite these signs of potentially receding inflation, Christine Lagarde, President of the European Central Bank (ECB), has cautioned that high borrowing costs may need to be maintained for an extended period to ensure price stability.
Reflecting this stance, the minutes from the ECB's recent policy meeting revealed a consensus among officials to remain vigilant and prepared to raise interest rates further if the situation demands.
Projections indicate that inflation might not align with the ECB’s target of 2% until the latter half of 2025, suggesting a protracted journey towards achieving the desired price stability in the Eurozone.
Year-end rally?
The diversification of the recent US equity market upswing beyond the dominant technology giants — often dubbed the "Magnificent Seven" — is raising optimism among traders and investors for a sustained rally as the year draws to a close.
This prominent cohort, comprising Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla, exerts significant influence on market indices, accounting for 28% of the S&P 500 and nearly half of the Nasdaq 100's composition.
The Nasdaq 100 has seen a remarkable surge, climbing nearly 47% year to date.
The broader market has also experienced a notable rise, with the S&P 500 gaining about 10% in the past three weeks. This uptick has been propelled by a drop in Treasury yields and signs of easing inflation, which some market participants interpreted as a precursor to the US Fed halting its interest rate hikes.
In this week, further insights into US inflation and consumer sentiment will be revealed, which could potentially influence market dynamics. Stronger-than-anticipated economic data has the capacity to trigger a sell-off in Treasury bonds, which would result in a rise in yields.
OPEC+ meeting
Oil prices dipped on Friday, yet the commodity recorded its first weekly rise in more than a month as the market anticipates the upcoming OPEC+ meeting, where discussions of potential production cuts for 2024 are expected to take centre stage.
Brent crude futures experienced a 1.4% decline, closing at $80.23 per barrel. Meanwhile, West Texas Intermediate (WTI) futures saw a sharper drop of 2.5%, concluding the trading session at $75.17 per barrel. Thursday's session lacked a settlement price for WTI due to the U.S. Thanksgiving holiday.
Last week's overall gain in oil prices sets the stage for the OPEC+ meeting this Thursday. The coalition, which includes the Organization of the Petroleum Exporting Countries and allies like Russia, is set to deliberate on reducing output in response to recent price drops triggered by worries over demand and increasing production from non-OPEC members.
Last Wednesday, OPEC+ caught the market off guard by postponing its meeting initially scheduled for 26 November to 30 November, as member countries faced challenges in reaching a consensus on production quotas.
China's outlook
On Thursday, China is set to publish its official Purchasing Managers' Index (PMI) for November, a key indicator that traders and investors will scrutinize for signs of economic rebound in the world's second-largest economy.
The October report indicated that China's manufacturing sector slipped back into contraction, undermining government efforts to stabilize the economy. The downturn has been exacerbated by subdued consumer spending and a significant downturn in the property sector, which is a crucial component of China's GDP, accounting for about 25%.
Despite these challenges, China's economy outperformed expectations with a 4.9% expansion in the third quarter. Nonetheless, the Chinese government is confronted with considerable challenges to meet its approximate annual growth goal of 5%.
South Africa News
On Friday, farmers in Limpopo voiced strong disapproval of Eskom's decision to initiate stage 6 load-shedding, emphasizing that such a move could have disastrous consequences for the agricultural sector.
In the midst of escalating living costs, erratic electricity supply, widespread crime, and disarray at the Durban port, President Cyril Ramaphosa remains optimistic about the ANC's prospects for success in the forthcoming general election.
Organized crime is intensifying in South Africa, with criminal syndicates becoming increasingly bold and reportedly targeting high-profile officials in the country.
Economic Calendar
In the upcoming economic calendar for this week, several significant events are scheduled to take place.
source: investing.com
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