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  • Writer's picturePeet Serfontein

Thoughts For the Week Ahead

The Week That Was

US equities reached new record highs on Friday, with the S&P 500 advancing by 1.07%, the Nasdaq increasing by 1.74%, and the Dow Jones Industrial Average climbing 134 points.

This surge was fueled by stellar earnings from major technology firms, buoying investor sentiment despite a jobs report that surpassed expectations.

Shares of Meta soared 20.32% following the announcement of its inaugural dividend and the largest quarterly sales growth in two years. Amazon's shares surged 7.87% after it reported a 14% increase in revenue. Nvidia also saw a rise of 4.97% in its shares, while Apple's shares dipped slightly by 0.54%, amid underwhelming sales in China.

ExxonMobil's shares fell by 0.46% after delivering mixed financial results. Conversely, Chevron's shares rose by 2.91%, following an 8% dividend increase.

On the employment front, the US economy added 353 000 jobs last month, significantly exceeding the anticipated 180 000, while the unemployment rate remained stable at 3.7%. Moreover, wage growth accelerated unexpectedly, adding another layer of complexity to the economic landscape.

The JSE closed slightly weaker on Friday, while the rand weakened the most in more than two weeks after the US jobs data.

The Week Ahead

This week, the US financial markets are braced for a bustling US earnings season, with key reports expected from a wide array of leading firms such as Amgen, Alibaba, ARM Holdings, Caterpillar, Eli Lilly, Ford Motor, McDonald's, PayPal, Pinterest, Estee Lauder, Spotify, Walt Disney, Philip Morris, PepsiCo, Uber, S&P Global, and Conoco Phillips. In addition, insights from several policymakers will be closely watched for hints about the Federal Reserve's future monetary policies.

On the economic front, attention in the US will turn to the ISM Services PMI survey, which is anticipated to show a rebound in service sector activity growth for January following a significant deceleration in December. Additional focal points include the latest figures on foreign trade, the RCM/TIPP Economic Optimism Index, and the final S&P Global Services PMI reading.

In Europe, expectations are set for retail sales to show a decline for the second month in a row in December.

The UK will spotlight the S&P Global PMIs for construction and services, alongside the Halifax House Price Index and the BRC Retail Sales Monitor, drawing attention to the domestic economic landscape.

Meanwhile, China is expected to report on inflation, Services PMI, and Q4 current account figures. The spotlight remains on the nation's economic pressures, with consumer and producer prices predicted to continue showing signs of deflation. Key Themes for the Week Ahead

US earnings season momentum

The earnings season remains in full swing, and this week's results will play a pivotal role in determining whether the recent equity market rally, leading to record highs, can be sustained.

The S&P 500 reached a new high on Friday, bolstered by positive job data. Facebook parent Meta Platforms and Amazon contributed significantly, with their shares rising 20% and 8%, respectively, following strong corporate results.

All three major US equity indexes secured their fourth consecutive weekly gains.

Although many prominent tech companies have already reported, a substantial batch of S&P 500 companies, including Eli Lilly, Walt Disney, ConocoPhillips and PepsiCo are set to report this week.

Traders and investors are keenly watching for insights into companies' outlooks for 2024, with expectations of faster earnings growth compared to 2023.

US economic data overview

The US economic calendar has quieted down after a busy week, featuring the January jobs report and the Federal Reserve's first meeting of the year.

Key data to watch includes Monday's ISM services PMI for January, with economists expecting an uptick in sector activity at the beginning of the year.

The Labour Department will release the weekly report on initial jobless claims on Thursday.

Traders and investors will also hear from several Fed officials during the week, including Atlanta Fed President Raphael Bostic, Cleveland Fed President Loretta Mester, Governor Adriana Kugler, Richmond Fed President Thomas Barkin, and Governor Michelle Bowman. Before that, Fed Chair Jerome Powell is scheduled to discuss the economy and inflation risks in an interview.

Oil price dynamics and geopolitical concerns

Oil prices saw a 2% decline on Friday, contributing to a 7% loss for both benchmarks over the week.

Traders and investors recalibrated expectations for a near-term rate cut from the Fed, potentially affecting crude demand. However, concerns over escalating tensions in the Middle East persist, with the US initiating retaliatory strikes against Iran-backed militants in Iraq and Syria.

The US and UK also launched fresh strikes against Houthi targets in Yemen, impacting key Red Sea shipping lanes crucial for global energy flows.

This marks the latest escalation in a conflict that has spread into the Middle East since 7 October, triggered by the Palestinian militant group Hamas storming Israel from the Gaza Strip.

China's inflation landscape

China is slated to publish inflation data on Thursday, expected to reveal intensified deflationary pressures.

Economists anticipate January’s consumer price index to come in at minus 0.5%, compared to minus 0.3% the prior month.

China's second-largest economy has grappled with persistently weak demand, a slowdown in the property sector, and fragile investor sentiment.

Chinese markets faced a challenging start to the year, with the blue-chip index ending January down 6%, marking a record six-month losing streak.

As the Lunar New Year approaches, some hope the annual travel rush might provide an economic boost.

South Africa News

  • President Cyril Ramaphosa has called on individuals alleging to possess evidence of corruption involving his deputy, Paul Mashatile, to submit their claims to the police rather than presenting him with a dossier.

  • The City of Ekurhuleni and the City of Tshwane metropolitan areas have failed to submit their annual financial statements to the Johannesburg Stock Exchange (JSE) within the mandated seven-month period. They now face a deadline until the end of the month to comply, or risk having their debt-raising instruments suspended.

  • The Department of Employment and Labour has recently updated its employment equity goals, placing an enhanced emphasis on diversity within senior and top management positions and modifying the specific objectives for African, Coloured, Indian, and White

Economic Calendar

In the upcoming economic calendar for this week, several significant events are scheduled to take place.

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