The Week That Was
On Friday, all three major equitu averages climbed by 0.4%, with the S&P 500 reaching a new high for 2023. This surge was driven by encouraging economic indicators, suggesting the possibility of a smooth economic downturn.
Notably, US nonfarm payrolls exceeded expectations with an increase of 199 000 in November, and the unemployment rate dropped to a four-month low of 3.7%. This data has lessened expectations of the US Federal Reserve (Fed) cutting interest rates as soon as spring 2024.
Additionally, the University of Michigan reported a significant rise in US consumer sentiment, reaching 69.4 in December. This improvement is accompanied by a decrease in inflation expectations for the coming year to 3.1%, the lowest since March 2021.
In the equity market, Lululemon Athletica saw a significant gain of 5.4% after announcing impressive quarterly results. Paramount experienced a notable surge of 12% amid speculation that Skydance Media and RedBird Capital might acquire parts of the media conglomerate. Meanwhile, Boeing's stocks jumped by 3.1%, and Uber's shares increased by 1.1%, hitting a 33-month peak at $61.9.
Overall, the week concluded with all three major equity averages extending their winning streak to six weeks, reflecting a robust period in the stock market.
On Friday, the JSE All Share Index experienced a decline, falling by nearly 1% to around 74 100, marking the second consecutive day of losses.
Domestically, there is significant interest in the recent appointment of the new CEO of Eskom. Dan Marokane has been confirmed as the chosen leader for the struggling utility company, a decision that is drawing considerable attention.
In terms of specific market sectors, resource-linked segments were among the hardest hit, showing a significant decrease of 5%. Conversely, the industrial sector exhibited resilience, gaining over 1%. Overall, the JSE is poised to end the trading period with a loss of nearly 1%, highlighting a challenging period for the market.
The Week Ahead
This week, the spotlight is on the Fed's final policy meeting of 2023. Market participants anticipate that US interest rates will remain at their highest in 22 years, with keen interest in any indications from the Fed's statement and Chair Jerome Powell's press conference about possible rate reductions in 2024.
Additionally, crucial US inflation data, including consumer, producer, and foreign trade prices, are due for release. Consumer prices are expected to have risen by 0.1% in November, while the core rate likely increased by 0.2%, consistent with the previous month's trend. Retail sales are projected to fall by 0.1%, and industrial activity is forecasted to rebound by 0.3%, recovering from a 0.6% decline in October.
In Europe, the European Central Bank (ECB) and the Bank of England (BoE) are expected to keep interest rates steady amid signs of easing inflation, but signals of future rate cuts will be closely monitored. The Eurozone's private sector activity is predicted to contract again in December, albeit at a slower pace, with manufacturing and services sectors showing signs of less severe contractions.
In the UK, the Office for National Statistics (ONS) will release important reports on employment and economic growth, including monthly GDP, manufacturing, construction, and foreign trade data. Consumer sentiment will be assessed by GfK, and S&P will provide updates on the manufacturing and services sectors' performance.
In China, economic data for November will offer insights into the effects of recent stimulus measures and liquidity boosts. Key indicators include industrial production, retail sales, unemployment rate, housing prices, and new yuan loans.
Meanwhile, Japan's BoJ Tankan Large Manufacturer’s Index is anticipated to reach a multi-year high in Q4. Key Themes for the Week Ahead
US Fed rate decision
Financial markets are poised with anticipation as they await the Fed's imminent policy statement, anticipated to be released on Wednesday at 21.00.
Amid a confluence of mixed economic indicators, the central bank is forecasted to adopt a steadfast stance on interest rates, likely maintaining the current levels. This posture is expected to mirror the Fed's effort to strike a delicate equilibrium—mitigating the recent economic deceleration while still keeping a vigilant eye on inflationary trends.
Investor sentiment has been attuned to the fluctuations in Treasury yields, with a strong consensus calling for stability in these uncertain times. The market's acute focus on the Fed's communication suggests that any hawkish indications could reaffirm a guarded stance towards future rate adjustments. Despite the slowdown, the Fed's rhetoric has been careful not to echo the more dire predictions of an impending recession, offering a degree of solace to the financial community.
Complicating the Fed's calculus are varied prognostications from economists regarding the timing of a potential economic contraction. A faction within the market analysis community posits that, should inflationary pressures recede and fiscal deficits loom larger, we might see an interest rate reduction as early as March.
However, expectations for such a dovish pivot are likely to be tempered by Fed Chair Jerome Powell. In his upcoming briefing, Powell is poised to condition any prospective rate decreases, underscoring a persistent readiness to counteract any inflationary resurgence.
This nuanced strategy underscores the Fed's commitment to its dual mandate: to promote maximum employment while ensuring price stability. With the policy statement on the horizon, investors are keen to decipher Powell's insights on steering through potential economic challenges and the trajectory of future monetary policy.
This analysis will be crucial as market participants strategise to navigate the probable economic turbulence ahead.
South Africa News
The latest Blue Drop Audit Report released by South Africa's Department of Water and Sanitation presents a concerning overview of the nation's drinking water quality and its water infrastructure. This report is designed as a tool for accountability, ensuring that water service authorities are responsible for delivering safe and clean drinking water to the public.
Trade union Solidarity is preparing to initiate legal actions against the government's National Health Insurance scheme. Concurrently, its research division has released survey results indicating a potential widespread departure of healthcare professionals from South Africa if the plan is implemented.
Dan Marokane, the newly appointed CEO of Eskom Group, has expressed his honour in receiving the position. The announcement of Marokane's appointment, made on Friday afternoon, follows a period of vacancy after the departure of former CEO Andre De Ruyter earlier this year. Marokane brings experience from his previous roles within the group executives and group capital departments at the state power utility.
In the upcoming economic calendar for this week, several significant events are scheduled to take place.