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  • Writer's picturePeet Serfontein

Thoughts For the Week Ahead

The Week That Was

US equities exhibited a mixed performance on Friday, with the record-setting surge, driven by expectations that the US Federal Reserve might implement three rate cuts this year, encountering a breather.

The Dow Jones Industrial Average receded by 305 points, falling short of the 40 000 milestone, while the S&P 500 experienced a slight decline of 0.1%. Conversely, the Nasdaq Composite edged higher by 0.2%, buoyed by Nvidia's impressive 3.1% gain, which propelled semiconductor stocks to their strongest quarter since 2001.

Amidst varying company performances, Nike's shares dropped 6.8% following its forecast of a sales dip in the upcoming half-year. Tesla saw a 1.1% decrease in its stock value amidst news of scaled-back electric vehicle production in its China facility. Lululemon faced a significant 15.7% drop in share value after presenting a less-than-optimistic growth forecast and reporting a slowdown in its North American market, marking its largest single-day loss since March 2020.

On a brighter note, FedEx shares climbed 7.3% as the company's earnings were bolstered by strategic cost reductions.

Over the week, the Dow Jones advanced nearly 2%, achieving its most robust week since December, while the S&P 500 and the Nasdaq concluded the week with gains of 2.3% and 2.9%, respectively.

On Friday, South African markets concluded the trading day on a positive note, with notable advancements across various sectors leading to a cheerful close. The day was particularly favourable for precious metal shares, despite a mix of performances within the sector.

Specifically, gold mining companies witnessed a downturn with Sibanye Stillwater, Gold Fields, AngloGold Ashanti, and Harmony Gold Mining Company experiencing declines of 11.9%, 5.3%, 2.8%, and 1.1% respectively. Similarly, platinum miners including Impala Platinum Holdings, Anglo American Platinum, and Northam Platinum faced drops of 10.9%, 8.1%, and 3.8%, respectively.

Contrastingly, the telecommunications sector enjoyed gains, with MTN Group, Telkom SA SOC, and Blue Label Telecoms climbing 7.4%, 4.8%, and 4.4%, respectively.

In the chemicals sector, AECI and Omnia Holdings saw upward movements of 1.7% and 0.8%, showcasing a modest but positive trajectory.

However, the property sector struggled, marked by declines in Delta Property Fund, Emira Property Fund, and Hyprop Investments, which fell by 12.5%, 3.4%, and 1.3%, respectively.

The financial services sector also experienced a slight retreat with Absa Group, Standard Bank Group, and FirstRand dipping by 1.6%, 0.9%, and 0.7%, respectively.

Despite these mixed results across various industries, the overall market sentiment remained bullish, leading the JSE All Share Index to rise by 1.2%, closing at 73 254.19.

The Week Ahead

In the US, attention is poised on Federal Reserve policymakers for guidance on the central bank's future direction, with special focus on Chairman Jerome Powell's expected speech this Friday.

Key indicators to watch include the PCE price indexes, personal income and spending, and durable goods orders. Analysts predict a 0.4% increase in February's PCE prices, a slight elevation from January's 0.3%, with core prices projected to rise by 0.3%. Consumer spending and income are both anticipated to grow by 0.4%. Furthermore, durable goods orders are forecasted to recover by 1.3% in February, bouncing back from a significant drop since April 2020.

Other crucial reports include the final Q4 GDP estimate, corporate earnings, and the Michigan consumer sentiment index, alongside regional economic indicators and housing market data. Notably, the US equity market will observe the Good Friday holiday with a closure.

In Europe, the week will see limited economic data releases due to the Easter holidays, with markets closed on Good Friday and Easter Monday. Notable data include Euro Area economic sentiment, Germany's GfK Consumer Confidence, retail sales, and unemployment rate.

The UK will spotlight its final Q4 GDP growth, business investment, and current account figures.

Asia is set for a quieter week, with China releasing industrial profits data amidst speculation on potential stimulus measures and currency management.

Japan will release minutes from the Bank of Japan's last meeting and other vital economic indicators, offering insights into future policy directions.

Key Themes for the Week Ahead

US economic outlook

The US is set to publish the core Personal Consumption Expenditures (PCE) price index on Good Friday, a day when markets are closed. This index, which omits food and energy costs, is anticipated to show a 0.3% increase for February. This follows a significant rise the previous month, marking its largest monthly gain in a year.


Despite upward adjustments to economic growth forecasts, the Federal Reserve maintains its projection for three interest rate reductions this year. However, it emphasises the need for more concrete evidence of inflation deceleration before considering policy easing.

Additionally, the economic agenda will highlight updates on new home sales, durable goods orders, revised Gross Domestic Product (GDP), and the weekly initial jobless claims report.


US Federal Reserve insights

This week will feature appearances from key Federal Reserve figures, including Chair Jerome Powell, Atlanta Fed President Raphael Bostic, and Governors Lisa Cook and Christopher Waller.

Some analysts suggest that these Fed officials might adopt a more hawkish stance regarding the future of policy interest rates, potentially influencing the 10-year yield.

Despite Powell's unexpectedly dovish remarks, the overall sentiment among Fed officials, as inferred from recent economic projections, suggests expectations of stronger economic growth, higher inflation, and a slight increase in the long-term interest rate, presenting a less dovish outlook than Powell's commentary might suggest.


Equity market trends

The equity market witnessed notable gains last week, with the S&P 500, Dow Jones Industrial Average and Nasdaq posting their largest weekly percentage increases since December and January, respectively.

While some analysts predict a potential market correction following the S&P 500's 27% surge since late October, others anticipate the upward trend will persist.

This optimism is supported by a diversification in market leadership, reducing the risk of a concentrated correction. Additionally, portfolio adjustments at the quarter's end may introduce further market volatility.


Oil market dynamics

Oil prices saw a minor decline last Friday, ending the week with minimal change. Factors such as the potential for a ceasefire in Gaza, ongoing conflicts in Europe, and a decrease in the US rig count influenced the market.

Furthermore, a strengthening US dollar, bolstered by the Swiss National Bank's unexpected rate cut, exerted additional pressure on oil prices by making it more costly for non-dollar holders.

Despite these challenges, analysts remain optimistic about the possibility of reaching new price highs, driven by an expansion in risk appetite following the Federal Reserve's less hawkish statements.


Global inflation concerns

The Reserve Bank of Australia is closely monitoring the upcoming inflation data, with February's figures expected to reflect changes in service prices more accurately than in previous months.

This data could reinforce the central bank's cautious stance before considering rate cuts amid a slowing economy. Inflation in Australia is predicted to increase slightly to 3.5% in February from 3.4% in January.

Meanwhile, Japan will release its inflation data on Friday, although the Bank of Japan's recent interest rate hike—the first in 17 years—may temper the response to these figures.

South Africa News

  • The water crisis, affecting residents of every socioeconomic status, marks an unprecedented period of shortage. Driven by a lethal combination of intense heat depleting reservoir levels and years of neglect leading to crumbling infrastructure, this crisis is at the forefront of the challenges facing the nation. Such escalating public dissatisfaction poses a considerable risk to the African National Congress's long-standing dominance, a party that has been at the helm since the demise of apartheid in the 1990s. With a pivotal election looming this year, the party's control is under threat as never before. Amidst the backdrop of enduring electricity blackouts, the nation is now confronting a phenomenon known as "watershedding." This term, mirroring "loadshedding" which refers to power outages, illustrates the distressing new reality of scheduled water cut-offs, further exacerbating the country's infrastructure challenges.

  • Almost thirty years since embracing democracy, land reform stands at the heart of South Africa's transformative agendas, including its agricultural strategy. Through efforts in redistribution, approximately 25% of the country's farmland is presently under the ownership of black South Africans. This progress moves us nearer to our goal of ensuring 30% ownership by 2030, highlighting a significant stride in our journey towards equity and inclusivity in land ownership.

  • Nosiviwe Mapisa-Nqakula, the Speaker of South Africa's National Assembly, announced her decision to take special leave amid ongoing investigations into accusations of corruption stemming from her tenure as Defence Minister. The probe into these allegations led investigators to conduct a raid on Mapisa-Nqakula's residence, though specific details about the investigation or the nature of the accusations have not been disclosed. Serving as Defence Minister from 2012 to 2021, Mapisa-Nqakula has firmly denied any misconduct.

Economic Calendar

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

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