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  • Writer's picturePeet Serfontein

Thoughts For the Week Ahead

The Week That Was


US equities rallied on Friday, buoyed by an unexpectedly weak April jobs report which shifted market expectations for a US Federal Reserve interest rate cut from November to September.


The S&P 500 increased by 1.2%, the Nasdaq rose by 2%, and the Dow Jones Industrial Average surged by 450 points.


The US economy added 175 000 jobs in April, missing the forecast of 243 000 and marking a slowdown from March's 315 000 job additions. The unemployment rate increased slightly to 3.9%, and wage growth was below expectations.


Apple's stock soared nearly 6% following the announcement of a $110 billion share buyback and strong earnings and revenue reports. Amgen experienced a significant 11.8% jump after surpassing earnings and revenue expectations, recording its best day in almost 15 years. Conversely, Cloudflare's shares dropped 16.4% after the company provided disappointing revenue guidance for the year.


For the week, the Dow increased by 0.9%, the S&P 500 by 0.3%, and the Nasdaq by 1.2%.


The Johannesburg Stock Exchange (JSE) rose on Friday, reaching approximately 76 650, its highest level since last December.


This surge was driven by strong performances in resource-linked shares, technology companies, industrials, and retailers.


Moodys Investors Service issued a warning that South Africa might face difficulties advancing in resolving longstanding national challenges if a coalition government forms after this month's elections.


Opinion polls indicate that the ruling ANC party may lose its national majority in the elections scheduled for 29 May, a first since it came to power in 1994.


In corporate developments, the JSE has entered into a memorandum of understanding with the Saudi Tadawul Group (STG), aimed at fostering financial market collaboration and strengthening economic ties between South Africa and Saudi Arabia.


For the week, the JSE was on track to secure a gain of over 1.5%.


The Week Ahead

In the US, the economic calendar appears light, but traders and investors will focus on comments from policymakers to glean insights into the US Federal Reserve's monetary policy stance.


Notable indicators to watch include the preliminary Michigan Consumer Sentiment, the RCM/TIPP Economic Optimism Index, the monthly government budget statement, and weekly jobless claims. Consumer sentiment is expected to show a slight decline for the second consecutive month in May.


In the UK, the Bank of England is expected to maintain its current monetary policy, following a decrease in the inflation rate to 3.2% in March, the lowest since September 2021. Although still above the 2% target, Governor Andrew Bailey remains optimistic about achieving the inflation target. The UK will also release preliminary first-quarter GDP, business investment, foreign trade balance, industrial production, and construction output.


European investors will await the ECB's monetary policy meeting accounts and the final services PMI is expected to confirm growth in major economies in April.


In China, the focus will be on April's trade figures to assess the momentum in the Chinese economy and the support from foreign demand for manufacturers amidst weak domestic consumer sentiment. China is also set to update its current account with first-quarter figures.


The Bank of Japan will release its Summary of Opinions, providing clues about its policy direction for the year, including potential yen operations. Japan will also report its balance of payments for March, which will reveal some impacts of the yen’s weakening.


Key Themes for the Week Ahead

Anticipating key insights from US Federal Reserve officials

This week offers a relatively light economic calendar, turning attention towards a series of important speeches by Federal Reserve officials.


This heightened focus follows comments from Chair Jerome Powell, who despite acknowledging persistent inflation challenges, expressed belief in potential rate reductions within the year.


Speeches are expected from notable figures such as New York Fed President John Williams and Richmond Fed President Thomas Barkin, with other Fed presidents and governors speaking later in the week, each likely to provide valuable perspectives on the future monetary policy directions.


Closing out the first-quarter US earnings season

The first-quarter earnings season is nearing its conclusion with several large-cap companies, including Walt Disney, Wynn Resorts, and Akamai Technologies, set to disclose their financial results.


This period also sees a variety of smaller companies, such as Bellring Brands and Light & Wonder, reporting their earnings.


The outcomes could reveal the impact of sustained high-interest rates on companies, particularly small caps, which are generally more sensitive to economic shifts and financing conditions.


Bank of England's decisions

Market participants are keenly awaiting the Bank of England's (BOE) rate statement on Thursday to discern any indications of potential rate cuts in the near future.


Although BOE officials earlier this year suggested the possibility of rate reductions, recent economic data presenting a complex view of inflationary trends in the UK economy have led markets to delay expectations for an initial rate cut from June to September.


In addition to the rate statement, the BOE will release its updated quarterly forecasts. Some analysts noted that any reductions in the medium-term inflation forecasts might be interpreted as an implicit endorsement by policymakers of market anticipations for rate cuts within the year.


Oil Market volatility

Last week, oil prices recorded their sharpest weekly decline in three months, with Brent crude falling over 7% and West Texas Intermediate (WTI) dropping by 6.8%.


This downturn was influenced by traders and investor concerns that persistently high borrowing costs could hinder economic growth in the US, the primary global oil consumer.


Meanwhile, geopolitical risk premiums associated with the Israel-Hamas conflict have diminished as both parties explore a temporary ceasefire and engage in discussions with international mediators.


Market participants are also monitoring whether the dip in oil prices could prompt the US government to refill its strategic petroleum reserves. The oil market was buoyed by speculations that if WTI drops below $79, the US might act to bolster its strategic reserves.


South Africa News

  • The ANC's National Disciplinary Committee (NDC), led by former Public Service Commission chairperson Ralph Mgijima, has summoned ex-president Jacob Zuma to attend a disciplinary hearing. The session is scheduled for Tuesday, May 7, at Luthuli House, the ANC's headquarters in Johannesburg.

  • Ratepayers in Ethekwini, already burdened by water cuts, electricity outages, and substandard service delivery, now face steep increases well above inflation for essential services including water, sanitation, and refuse removal, with some rates rising by double digits.

  • South Africa is currently experiencing an unusual period of uninterrupted electricity just before the elections, which has sparked more suspicion than commendation in a country plagued by persistent power cuts for years. This marks the fourth consecutive week without outages, the longest stretch of reliable electricity supply South Africans have enjoyed in over two years. This unexpected stability in power supply comes as political parties intensify their campaigns ahead of the 29 May elections, where the ruling African National Congress faces the possibility of losing its parliamentary majority for the first time in thirty years.

Economic Calendar

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


Source: incorporates insights from reports by Reuters and Investing.com.



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