The Week That Was
In a fluctuating trading session on Friday, US equity markets closed lower, with a waning rally in semiconductor stocks contributing to the downturn.
Nvidia's stock took a notable hit, dropping by 5.4%, which led to declines in major indexes: the S&P 500 fell by 0.6% and the Nasdaq 100 by 1.5%, both pulling back from recent highs. The Dow Jones Industrial Average shed 68 points, though its losses were mitigated by a 1% gain in Apple shares, which broke a seven-day losing streak, supporting the index.
Additionally, the market absorbed the latest US employment data, suggesting the US Federal Reserve might begin reducing interest rates as early as June. The February jobs report exceeded expectations, yet revisions showed significant reductions in job growth for January and December and an unexpected uptick in the unemployment rate.
Among individual stocks, Broadcom experienced a 7% decline after disappointing full-year projections and quarterly earnings that fell short of expectations.
Over the week, the S&P 500 dropped by 0.2%, the Nasdaq by 1%, and the Dow Jones by 0.7%, marking its most challenging week since October 2023.
The JSE All Share index showed little movement, hovering around 73 560 on Friday, as traders and investors traded cautiously in anticipation of the upcoming nonfarm payrolls report from the US, a key indicator that could shed light on future interest rate decisions.
Federal Reserve Chair Jerome Powell, on Thursday, reiterated his stance that the central bank is close to a position where it could lower interest rates. He emphasised, however, that a consistent move towards the 2% inflation target would be a prerequisite for such a cut.
Among individual shares, notable declines were seen in Pick n Pay (down 2.7%), MTN Group (down 2.5%), and Alphamin Resources (down 2.4%), while Montauk Renewables led the gains, jumping over 5%, making it the top performer in the index for the day.
Over the course of the week, the JSE was on track to secure a gain of 1.1%.
The Week Ahead
This week in the US, attention is riveted on the highly anticipated February CPI report, accompanied by data on retail sales, industrial production, and an initial gauge of Michigan's consumer sentiment for March. The headline inflation rate is expected to hold steady at 3.1% for February, with the core inflation rate predicted to fall to 3.7%, marking its lowest point since April 2021. Both headline and core inflation are forecasted to increase by 0.4% and 0.3% month-over-month, respectively. Retail sales are anticipated to rebound with a 0.5% increase, partially offsetting a 0.8% drop in January, while industrial production is projected to stabilize following a slight 0.1% decrease.
In the UK, forthcoming updates include monthly GDP figures, industrial production, trade balance, and employment data. The economy is poised for a rebound in January, despite a pause in industrial and manufacturing output after two months of expansion. The jobless rate is expected to remain at 3.8% for the three months to January, its lowest in a year, with average weekly earnings, including bonuses, likely to fall slightly to 5.7%, the lowest since July 2022.
Euro Area industrial activity is forecasted to decrease after two months of consecutive gains.
China's economic highlights include the People's Bank of China's announcement on the one-year medium-term lending facility rate, with growing expectations of a potential rate cut. Post-Lunar New Year effects are anticipated to moderate loan growth from January's record highs, while the house price index remains a critical measure to monitor. Japan's final GDP growth figures for Q4 are expected to be revised up to 0.3% growth from an initial estimate of a 0.1% contraction, buoyed by increased corporate investment. The focus will also be on machine tool orders and the Producer Price Index. In India, a slight reduction in inflation rates is forecasted for both retail and wholesale sectors, alongside an expectation for a modest acceleration in industrial production.
Key Themes for the Week Ahead
US inflation
Market participants are keenly anticipating the release of the US inflation figures on Tuesday to assess the timing of the US Federal Reserve's potential interest rate reductions.
Expectations are set for the consumer price index (CPI) of February to exhibit a 0.4% increase, following a surprisingly swift 0.3% rise in January.
During a statement on Thursday last week, Jerome Powell, the Chair of the Federal Reserve, indicated that lowering interest rates could be a reasonable move "at some point this year." However, he emphasized that he and his colleagues are not yet prepared to take such action.
Additionally, attention is turning towards the retail sales data for February, scheduled for release on Thursday, with forecasts predicting a 0.8% recovery after a decline of the same magnitude the previous month.
The week's economic agenda also includes updates on industrial production, consumer sentiment, and the weekly figures for initial jobless claims.
As the Fed officials enter the customary blackout period preceding their next meeting (19 to 20 March 2024), market observers and investors are closely monitoring these developments for insights into future monetary policy directions.
Equity markets
On Friday, Wall Street's primary indexes concluded a week marked by volatility with losses, as Nvidia, a standout in the artificial intelligence sector, saw its shares decline following a recent surge.
Nvidia witnessed its most significant daily loss since late May on Friday, with a downturn exceeding 5%. Nevertheless, the company's stock closed the week with an impressive gain of over 6%, continuing a rally that has contributed more than $1 trillion to its market capitalization this year.
Analysts attribute this pullback to traders and investors deciding to secure profits after the market's recent ascent.
The forthcoming inflation data is unlikely to convince the Federal Reserve that inflationary pressures are subsiding quickly enough to justify an immediate adjustment in monetary policy. This prospect may lead market participants to maintain a degree of caution.
Energy prices
Oil prices ended 1% lower on Friday, with a more substantial decline over the week, amid persistent concerns about subdued demand from China, despite the OPEC+ group's decision to prolong supply reductions.
For last week, Brent crude experienced a 1.8% decrease, while West Texas Intermediate (WTI) futures saw a 2.5% decline.
China's recent announcement of a 5% economic growth target for 2024 has been met with scepticism by many analysts, who argue that achieving such a goal would require significant additional stimulus.
On the supply front, the OPEC+ alliance, spearheaded by Saudi Arabia and Russia, has decided to continue its voluntary production cut of 2.2 million barrels per day into the next quarter. This move aims to bolster the market amidst concerns about global economic growth and increasing oil production outside of the OPEC+ group.
Moreover, energy market participants are keenly observing potential interest rate cuts by the Federal Reserve and the European Central Bank. Lower interest rates could spur oil demand by stimulating economic growth.
UK employment data
The UK is poised to unveil its most recent employment data on Tuesday, capturing the attention of both investors and the Bank of England, particularly with regard to wage growth and its implications for the timing of an anticipated interest rate cut.
In December, the pace of average hourly earnings growth moderated to 6.2%, marking the slowest increase in more than a year. However, this deceleration was not sufficient to persuade Bank of England officials that the current interest rates, which are at a 16-year peak, should be reduced in the near term.
On another note, the Eurozone is scheduled to announce its industrial production figures for January. The data from December revealed a significant surge in production, offsetting a year's worth of declines. Another robust performance would signal a positive outlook for the Eurozone's GDP growth in the first quarter.
Bitcoin price action
Bitcoin recently reached a new all-time high, surpassing $70 000. This surge is largely attributed to the growing interest in new US spot Bitcoin ETFs launched this year and the anticipation of declining global interest rates.
In recent weeks, ETFs have attracted billions of dollars, while the market has also been buoyed by the forthcoming upgrade to the Ethereum blockchain platform, which hosts the second-largest cryptocurrency, Ether, and the anticipated Bitcoin "halving" event in April. This event is expected to reduce the rate at which new bitcoins are created.
Despite the market's previous downturn in 2021, known as the "crypto winter," which led to significant losses for many investors due to bankruptcies and failures within major crypto firms, the influx of investment continues. This past downturn resulted in heightened regulatory warnings concerning the risks involved.
However, the persistent inflow of capital suggests a renewed confidence in the cryptocurrency sector. Enthusiasts argue that the industry has evolved and matured, though central bankers and regulators maintain a cautious stance. Investors are now speculating about the potential growth of the market and whether this time will be different.
South Africa News
The top leadership of the ANC, known as the ANC top 7, has identified senior party members recommended for removal from the party's national lists due to negative conclusions drawn against them in the State Capture Report by Chief Justice Raymond Zondo. Nonetheless, a significant portion of the party's National Executive Committee members are of the opinion that actions to remove these individuals from the Parliamentary list should be temporarily paused.
Former President Jacob Zuma has emerged as the leading candidate on the Umkhonto we Sizwe Party (MKP) list for the National Assembly in the upcoming national and provincial elections scheduled for 29 May. Zuma declared his support for this new breakaway party last December. Although he has neither departed from the ANC nor been expelled, he has now become the prominent figure in its campaign for the forthcoming election.
Standard Bank has released a cautionary notice advising the public to steer clear of a fraudulent entity or website that is illegitimately utilising the bank's information to validate its unlawful operations. This entity, operating under the name Direct Access Finance, falsely claims its location at the Standard Bank Centre, 5 Simmonds Street, Johannesburg.
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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