The Week That Was
In Friday's trading session—the year's first occurrence of triple witching—US equities concluded with declines. The S&P 500 dipped by 0.6%, while the Nasdaq saw a 1% decrease, and the Dow Jones Industrial Average shed 190 points. The day was characterised by significant volatility, driven by a major expiration of options and a pronounced sell-off in the technology sector.
Market participants are keenly anticipating the US Federal Reserve's upcoming decision, influenced by recent economic data that revealed inflation rates, as indicated by the Consumer Price Index (CPI) and Producer Price Index (PPI), surpassing expectations. This has fueled speculation that anticipated interest rate cuts may be delayed to later in the year.
The technology sector experienced the most significant downturn, with notable declines in prominent companies: Microsoft's shares fell by 2%, Apple by 0.2%, Amazon by 2.4%, and Alphabet by 1.5%. Nvidia, too, saw a slight decline, following a 3.2% drop the previous Thursday. Additionally, Adobe's shares plunged by 13.6% after the company projected quarterly revenues that fell short of expectations.
Over the week, the market showed mixed performance; the S&P 500 and the Dow Jones Industrial Average recorded modest gains of 0.3% and 0.2%, respectively, whereas the Nasdaq experienced a slight decrease of 0.1%.
On Friday, the JSE All Share index dropped by approximately 0.5% to close at 72 990.7, marking its lowest point in over a week, amid growing caution from traders ahead of the Federal Reserve's meeting. This shift in sentiment follows recent economic indicators that suggest inflation remains persistently high.
Consequently, the likelihood of the Federal Reserve lowering interest rates at the June policy meeting has decreased.
On the domestic front, the upcoming release of South Africa's consumer price inflation data for February is highly anticipated.
In terms of individual shares, African Rainbow Minerals, Kumba Iron Ore, Karoo, Outsurance Group, and Montauk Renewables were among the day's most significant decliners. Conversely, Dis-Chem Pharmacies, Sirius, Impala Platinum, and Alphamin Resources stood out as the top performers, achieving the largest gains.
Overall, the JSE experienced a decline of about 1% over the week.
The Week Ahead
The US Federal Reserve is poised to keep interest rates steady for the fifth consecutive meeting this Wednesday, in light of a robust labor market and gradually easing inflationary pressures.
Traders and investors are set to keenly analyse the FOMC's economic projections and the "dot plot" interest rate forecasts for hints about when interest rate cuts may occur, especially in the wake of recent CPI and PPI data that came in higher than anticipated, leading traders to temper their expectations for imminent rate reductions.
The March PMI survey is projected to indicate a modest deceleration in manufacturing sector growth, following its strongest expansion since July 2022 in February, and a slight easing in the service sector's growth rate for the second consecutive month. Housing starts are expected to recover to 1.447 million from a five-month low in January, with building permits anticipated to climb to 1.5 million, reaching their highest point since last August. However, existing home sales may see a dip to 3.94 million in February, down from 4.0 million the prior month.
In the UK, the Bank of England is likely to maintain interest rates at 5.25% Thursday, with a rate reduction forecasted for August. February's headline inflation is expected to increase by 0.7% month-on-month, leading to an annual deceleration to 3.6%, marking the lowest rate since September 2021.
S&P Global PMIs for March are predicted to show the Eurozone's private sector activity stabilising, with a slower contraction in manufacturing and continued expansion in services. Additionally, Euro Area consumer confidence is anticipated to reach its highest level since February 2022.
In Japan, expectations are for the Bank of Japan to conclude its negative interest rate policy following annual labour negotiations that resulted in significant wage increases by major firms. Key economic indicators, including inflation figures, flash PMIs, trade statistics, the Reuters Tankan index, and final industrial production figures, will be closely watched by traders.
In China, the People's Bank of China is expected to maintain the 1-year and 5-year loan prime rates. Early-year economic data, covering industrial production, retail sales, and fixed asset investment, are set to provide insights into the country's economic health in the first two months of the year. Forecasts suggest a slowdown in industrial production and retail sales, with a marginal increase in fixed asset investment.
Key Themes for the Week Ahead
The US Federal Reserve's upcoming interest rate decisions
Recent US economic data revealing higher-than-anticipated inflation rates have led traders and investors to adjust their expectations regarding the Federal Reserve's monetary policy.
The upcoming Federal Reserve meeting on Wednesday is highly anticipated for insights into the Fed's stance on interest rate adjustments, the robustness of the US economy, and the potential for inflation fluctuations.
Fed Chair Jerome Powell earlier indicated a growing confidence in achieving the central bank's 2% inflation target, albeit with a cautious approach towards confirming a sustained inflation slowdown before considering policy easing.
Some analysts anticipate potential policy easing around mid-year, expecting the upcoming Federal Open Market Committee (FOMC) meeting to extend the current period of uncertainty. They highlight Powell's requirement for more substantial evidence of lasting disinflation before any rate reductions.
Bank of Japan's strategic shift
The Bank of Japan's (BOJ) next meeting is poised to be a pivotal moment, potentially concluding an eight-year period of negative interest rates and signalling a departure from extensive stimulus measures.
Reports suggest an imminent end to the negative interest rate policy, buoyed by significant wage increases agreed upon by Japan's major corporations and labour unions. This move has sparked market interest in the BOJ's future rate hike trajectory.
Bank of England's cautious approach
The Bank of England (BoE) is expected to maintain a cautious stance in its upcoming rate announcement, awaiting more clarity on wage growth trends.
With market predictions leaning towards a reduction in borrowing costs from the current 5.25% in August, the BoE's forthcoming statements and the upcoming inflation report could critically influence policy direction.
Nvidia's developer conference
The Nvidia GTC developer conference is set to commence on Monday, with the technology community eagerly awaiting AI innovation announcements.
CEO Jensen Huang's keynote is particularly anticipated for potential reveals of new products, including the advanced B100 GPU. The NVIDIA Blackwell B100 GPU is a next-generation AI accelerator, promising to deliver more than double the AI performance of its predecessor, the Hopper H200.
Despite Nvidia's significant market value increase this year, recent equity volatility post-7 March highlights the high stakes and keen investor interest in the company's announcements.
Oil market dynamics
Oil prices experienced a slight dip following a peak above $85 per barrel, yet ended the week with over a 3% gain amid heightened US refinery demand.
The upcoming Federal Reserve meeting and its implications for interest rate policies are on energy traders' radar, considering the impact on US demand growth.
Despite a strong US dollar posing challenges, optimistic forecasts from the International Energy Agency on 2024 oil demand, coupled with geopolitical tensions affecting Red Sea shipments, have contributed to the price resilience.
South Africa news
The GOOD Party has declared seasoned politician Patricia De Lille as its nominee for the position of Western Cape premier. Emphasising De Lille's relentless commitment, GOOD highlighted, “With De Lille at the helm, voters can be confident she will persist in her efforts until the mission is accomplished.” The party further noted that her battle for a more equitable South Africa began well before 1994 and is set to endure beyond 2024.
South Africa is grappling with a significant hurdle in its quest to halt the persistent electricity blackouts that have stifled economic growth. The nation is tasked with the ambitious goal of constructing and financing an R390 billion expansion of the national grid, a critical step to facilitate the connection of additional power plants.
The ongoing water crisis in Johannesburg has persisted for over a week and a half, with Mayor Kabelo Gwamanda reporting improvements in the situation. He observed that the city's water system is currently in a "better condition" than it was last week, with the water supply showing signs of gradual recovery. Gwamanda also pointed out significant progress in the repair of infrastructure affected by complications at the pump station.
Economic Calendar
In the upcoming economic calendar for this week, several significant events are scheduled to take place.
source: investing.com