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Peregrine Treasury Services Weekly Market Wrap 10 May 2019
Date: 10 May 2019 Category: Stock Market |
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In our continued efforts to give our readers a broad number of views, opinions and information, we provide readers with Peregrine Treasury Services weekly market wrap below.
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Peregrine Treasury Services Weekly Wrap as at 10 May 2019
A relatively disruptive week was seen on South African shores, following a handful of public holidays over the April/May period. Along with this, voting day hastily crept up on most local citizens, who ventured off toward their respective voting stations on a surprisingly chilly autumn day. Every vote counts, and to those citizens who made the effort to brave the cold and etch some ink onto a piece of paper, South Africa appreciates the concern that was expressed for her. Further abroad, the US-China trade war continues to rumble, as President Donald Trump increased tariffs from 10.00% to 25.00% on $200 billion worth of Chinese goods. Is this potentially the straw that could break the camel’s back?
GLOBAL DATA AND
The growth potential of China is under threat, yet again, as US President Donald Trump threatened to impose yet another round of tariffs on Chinese imports, with analysts projecting a 1.00% decline in Chinese growth, should the threat by Donald Trump be realised. This week saw Chinese exports decelerate by 2.70% year-on-year for April, while imports accelerated by 4.00% for the same period.
Consumer price index (CPI) released on Thursday remained in line with expectations at 2.50% year-on-year, while producer price index (PPI) ticked up marginally by 0.90%. While China is slowly converting its production-driven economy to one driven by consumerism, countries driven largely by commodities remain dependent on continuous economic growth and imports from this emerging powerhouse. The environment in the European Union (EU) remains subdued, with marginal increases in both services purchasing manager’s index (PMI) for April and manufacturing PMI for May, increasing to 52.8. Retail sales in the euro zone decelerated from the previous 3.00% to 1.90% year-on-year in March - in line with market expectations.
Little data was seen coming from the rest of the emerging market this week. Russia reported CPI of 5.20% year-on-year, while Turkish exports decelerated to $14.49 billion during April, from the previous $15.49 billion. Industrial production in Argentina also felt the pinch, decelerating by 13.40% year-on-year during March.
The dim emerging market picture continues as we shift our focus to the local economy, with economic data remaining soft. An uptick in business confidence, rising to 93.7 points ahead of the general election on Wednesday did little to impact on financial markets, while mining and gold production both remained negative, coming in at -1.10% and -17.70% respectively for March. A slight increase in manufacturing production of 0.80% was reported for the same period on Thursday.
A bit of positive news from the U.K. as the Halifax House Price Index accelerated by 1.10% month-on-month during April, while BRC retail sales increased by 3.70% year-on-year. Friday will see the release of gross domestic product (GDP), as well as industrial and manufacturing output performance.
US POLITICS
This week, Donald Trump once again sent anxiety levels through the roof, as he announced on Twitter that a new bout of tariffs are on the cards for Chinese imports, causing a fresh round of risk-off sentiment throughout the global market environment. President Donald Trump sure knows how to keep the market’s attention. Looking at some of the key economic data, the strategy however seems to be working for the US economy, with JOLTS job openings increasing to 7.48 million, while core PPI remains within expectations at 2.20% year-on-year. While initial jobless claims overshot the expected figure marginally, the figure still indicated a decrease to 228,000 from the previous weeks 230,000. Markets will be keeping an eye on CPI figures on Friday, in an effort to get a sense of future interest rate stances by the Fed, while real earnings are also due for release.
US EQUITIES
After reaching historic highs for the second time in eight months, the NASDAQ was seen falling at least 2.38% during the first two weeks of May 2019. Following the same path as the NASDAQ, the S&P 500 found some support at levels of around 2,836.32 points after correcting almost three percent over the last two weeks. Friday’s CPI announcement will be watched with great anticipation as the world now has to swallow the reality of an even rockier economic environment, following the additional tariffs imposed on China by the US. Emerging markets may tend to see some restraint over the next few trading days, following the tariff increases on Chinese goods.
Overall, the market has taken a healthy step back over the last two weeks, indicating a potentially interesting time to top-up one’s portfolio with discounted stock, however, the tension floating around the market currently should prompt one to think more-than-twice, before actually going ahead with those purchases. For now, there’s nothing that points toward a mini ‘flash-crash’ situation that we saw at the end of 2018, while threats of a major global recession are few and far between. The only real threat, currently, is how the global markets react to the Chinese tariff increases. So far, US futures point towards a lower start to Friday’s trading day. Could this see the US closing down for the fifth consecutive day this week?
After a long wait, Uber Technologies (UBER) will finally list on the NASDAQ Composite upon market open today. Analysts expect the stock to open at the lower end of their estimates at around $45.00 per share. It’s going to be a feeding frenzy, and with a turbulent economic environment recently – in the greater picture, one should act with caution, when it comes to trading UBER today. Considering the roughly 36.61% fall from its listing price, Lyft should be kept in mind as a comparable tech IPO. It’s not all rosy out there.
FAANGs performance, for the month of May-to-date:
In South African rand-terms, add 0.20% to each of these return-figures to see what the South African investor could be up in 2019, with the currency-effect added.
COMMODITIES
Down around 7.00% since the 25th of April, both US West Texas Intermediate (WTI) and OPEC’s Brent Crude oil finally paused the recent two week sell-off recently seen in the oil sector, with WTI indicating a relatively large four million barrels-a-week slowdown in output on western shores. This slowdown in oil production, coupled by the threat of further tariffs being placed on US trade partners, may influence the price of oil in an upward manner over the coming week. For now, Brent Crude is looking comfortable around the $70.00 a barrel mark. Brent Crude opened Friday’s trading day at $70.58 per barrel, while WTI opened at $61.99.
After slipping early in the month, gold seemed to attract investor’s interest over the last week, on the run up to Trump’s tariff announcement. The flow of global money toward gold yesterday, suggests that there is definitely a slight unease in the market. Palladium continued its downward spiral from recent highs, dropping around 4.34% since the beginning of the month. Platinum kept close to palladium’s move, dipping just over 3.00% during the same period. On Friday morning, gold, platinum and palladium were trading at levels of around $1,284.62, $856.90 and $1,311.73 per fine ounce respectively.
SOUTH AFRICAN POLITICS
The election has come and gone, and as expected the African National Congress (ANC) is leading the race in the national election, with the Council for Science and Industrial Research (CSIR) predicting a 57.40% result for the ANC, followed by the Democratic Alliance (DA) at 21.50% and the Economic Freedom Fighters (EFF) as 9.50%. While the win by the ANC has been largely expected to be rand-positive, the current global risk-off environment effected by the US/China trade dynamic has put a dampener on the performance of the local currency.
As the ANC win is digested, markets will swiftly shift their focus to the subsequent actions of the ruling party, including the announcement of cabinet by President Cyril Ramaphosa, the State of the Nation Address (SONA) - due to follow in June, as well as policies relating to expropriation of land without compensation. A key focus, as we head in to post election season will be Eskom and the anticipated restructuring of the power utility, as this dilemma remains the biggest threat to South Africa’s economic growth.
The rand traded mostly flat during local trading sessions, while experiencing some relief in the overnight sessions. The global dynamic is largely overshadowing the local developments, in terms of elections, and for the time being we are playing ‘wait and see’ as to what reaction the markets may bring from the tariff increases imposed by President Donald Trump on China. With the tariff’s being implemented, one can expect the rand to once again lean towards weakness, potentially targeting R14.60.
The broader range of the rand has been between R14.35 to R14.48 against the US dollar, with occasional dips in the overnight to R14.30. Key support and resistance levels can be assumed at around R14.30 and R14.50 for the time being.
SOUTH AFRICAN EQUITY
Locally, markets have followed the general 3.00% correction, seen globally, over the past two weeks. Among the recent weeks riddled by public holidays, thinner volumes were seen going through the JSE, especially on the run-up to elections and voting day. Steinhoff continue to slowly lift the veil on their clandestine ethics, through the presentation of historical results and audit reports to the public. On Tuesday evening, Steinhoff reported their 2017 financial year numbers which saw the correction of massive overstatement of key figures being done. This gave the shareholder more of a true feel for the company’s real operational performance, while still carrying some murky details.
The only real positive arising from Steinhoff’s results is that shareholders are finally beginning to see more transparency and honesty from the company, although the large write-offs, impairments and restatements will leave a bitter taste in their mouths. With inflated intangible issues largely addressed, future financial statements will paint a clearer picture of the path ahead for Steinhoff, particularly in terms of its operational ability.
Additionally, the current board of directors seems to be doing a decent job of ensuring that a full and accurate account of past wrongdoings is presented fairly to shareholders and stakeholders alike. The 2018 report, which should also be released within the next few months, may finally show the underlying shareholder the true colours of Steinhoff. The share was down around 20.00% on the day following the results release, opening up Friday’s trading day at R1.60
Here’s some of the bigger movers on the JSE for the 2019 year so far, as at Friday morning:
THE WEEK AHEAD
The week ahead will largely be influenced by how the market swallow’s the tariffs imposed on China by Donald Trump, while from a local perspective, one should keep a keen eye on the unfolding political situation and official election results. Potential coalitions and the much anticipated appointment of the cabinet, by President Ramaphosa, will provide the general investor with a clearer sense of direction going forward, as Ramaphosa tries to steer South Africa’s vessel out of stormy seas.
On Friday morning the rand would’ve set investors back R14.33 per Greenback, R16.09 a euro and R18.65 a British pound.
GLOBAL DATA AND
The growth potential of China is under threat, yet again, as US President Donald Trump threatened to impose yet another round of tariffs on Chinese imports, with analysts projecting a 1.00% decline in Chinese growth, should the threat by Donald Trump be realised. This week saw Chinese exports decelerate by 2.70% year-on-year for April, while imports accelerated by 4.00% for the same period.
Consumer price index (CPI) released on Thursday remained in line with expectations at 2.50% year-on-year, while producer price index (PPI) ticked up marginally by 0.90%. While China is slowly converting its production-driven economy to one driven by consumerism, countries driven largely by commodities remain dependent on continuous economic growth and imports from this emerging powerhouse. The environment in the European Union (EU) remains subdued, with marginal increases in both services purchasing manager’s index (PMI) for April and manufacturing PMI for May, increasing to 52.8. Retail sales in the euro zone decelerated from the previous 3.00% to 1.90% year-on-year in March - in line with market expectations.
Little data was seen coming from the rest of the emerging market this week. Russia reported CPI of 5.20% year-on-year, while Turkish exports decelerated to $14.49 billion during April, from the previous $15.49 billion. Industrial production in Argentina also felt the pinch, decelerating by 13.40% year-on-year during March.
The dim emerging market picture continues as we shift our focus to the local economy, with economic data remaining soft. An uptick in business confidence, rising to 93.7 points ahead of the general election on Wednesday did little to impact on financial markets, while mining and gold production both remained negative, coming in at -1.10% and -17.70% respectively for March. A slight increase in manufacturing production of 0.80% was reported for the same period on Thursday.
A bit of positive news from the U.K. as the Halifax House Price Index accelerated by 1.10% month-on-month during April, while BRC retail sales increased by 3.70% year-on-year. Friday will see the release of gross domestic product (GDP), as well as industrial and manufacturing output performance.
US POLITICS
This week, Donald Trump once again sent anxiety levels through the roof, as he announced on Twitter that a new bout of tariffs are on the cards for Chinese imports, causing a fresh round of risk-off sentiment throughout the global market environment. President Donald Trump sure knows how to keep the market’s attention. Looking at some of the key economic data, the strategy however seems to be working for the US economy, with JOLTS job openings increasing to 7.48 million, while core PPI remains within expectations at 2.20% year-on-year. While initial jobless claims overshot the expected figure marginally, the figure still indicated a decrease to 228,000 from the previous weeks 230,000. Markets will be keeping an eye on CPI figures on Friday, in an effort to get a sense of future interest rate stances by the Fed, while real earnings are also due for release.
US EQUITIES
After reaching historic highs for the second time in eight months, the NASDAQ was seen falling at least 2.38% during the first two weeks of May 2019. Following the same path as the NASDAQ, the S&P 500 found some support at levels of around 2,836.32 points after correcting almost three percent over the last two weeks. Friday’s CPI announcement will be watched with great anticipation as the world now has to swallow the reality of an even rockier economic environment, following the additional tariffs imposed on China by the US. Emerging markets may tend to see some restraint over the next few trading days, following the tariff increases on Chinese goods.
Overall, the market has taken a healthy step back over the last two weeks, indicating a potentially interesting time to top-up one’s portfolio with discounted stock, however, the tension floating around the market currently should prompt one to think more-than-twice, before actually going ahead with those purchases. For now, there’s nothing that points toward a mini ‘flash-crash’ situation that we saw at the end of 2018, while threats of a major global recession are few and far between. The only real threat, currently, is how the global markets react to the Chinese tariff increases. So far, US futures point towards a lower start to Friday’s trading day. Could this see the US closing down for the fifth consecutive day this week?
After a long wait, Uber Technologies (UBER) will finally list on the NASDAQ Composite upon market open today. Analysts expect the stock to open at the lower end of their estimates at around $45.00 per share. It’s going to be a feeding frenzy, and with a turbulent economic environment recently – in the greater picture, one should act with caution, when it comes to trading UBER today. Considering the roughly 36.61% fall from its listing price, Lyft should be kept in mind as a comparable tech IPO. It’s not all rosy out there.
FAANGs performance, for the month of May-to-date:
- Facebook: down around 1.83%
- Amazon: down around 1.75%
- Apple: down around 0.39%
- Netflix: down around 2.77%
- Alphabet: down around 2.21%
In South African rand-terms, add 0.20% to each of these return-figures to see what the South African investor could be up in 2019, with the currency-effect added.
COMMODITIES
Down around 7.00% since the 25th of April, both US West Texas Intermediate (WTI) and OPEC’s Brent Crude oil finally paused the recent two week sell-off recently seen in the oil sector, with WTI indicating a relatively large four million barrels-a-week slowdown in output on western shores. This slowdown in oil production, coupled by the threat of further tariffs being placed on US trade partners, may influence the price of oil in an upward manner over the coming week. For now, Brent Crude is looking comfortable around the $70.00 a barrel mark. Brent Crude opened Friday’s trading day at $70.58 per barrel, while WTI opened at $61.99.
After slipping early in the month, gold seemed to attract investor’s interest over the last week, on the run up to Trump’s tariff announcement. The flow of global money toward gold yesterday, suggests that there is definitely a slight unease in the market. Palladium continued its downward spiral from recent highs, dropping around 4.34% since the beginning of the month. Platinum kept close to palladium’s move, dipping just over 3.00% during the same period. On Friday morning, gold, platinum and palladium were trading at levels of around $1,284.62, $856.90 and $1,311.73 per fine ounce respectively.
SOUTH AFRICAN POLITICS
The election has come and gone, and as expected the African National Congress (ANC) is leading the race in the national election, with the Council for Science and Industrial Research (CSIR) predicting a 57.40% result for the ANC, followed by the Democratic Alliance (DA) at 21.50% and the Economic Freedom Fighters (EFF) as 9.50%. While the win by the ANC has been largely expected to be rand-positive, the current global risk-off environment effected by the US/China trade dynamic has put a dampener on the performance of the local currency.
As the ANC win is digested, markets will swiftly shift their focus to the subsequent actions of the ruling party, including the announcement of cabinet by President Cyril Ramaphosa, the State of the Nation Address (SONA) - due to follow in June, as well as policies relating to expropriation of land without compensation. A key focus, as we head in to post election season will be Eskom and the anticipated restructuring of the power utility, as this dilemma remains the biggest threat to South Africa’s economic growth.
The rand traded mostly flat during local trading sessions, while experiencing some relief in the overnight sessions. The global dynamic is largely overshadowing the local developments, in terms of elections, and for the time being we are playing ‘wait and see’ as to what reaction the markets may bring from the tariff increases imposed by President Donald Trump on China. With the tariff’s being implemented, one can expect the rand to once again lean towards weakness, potentially targeting R14.60.
The broader range of the rand has been between R14.35 to R14.48 against the US dollar, with occasional dips in the overnight to R14.30. Key support and resistance levels can be assumed at around R14.30 and R14.50 for the time being.
SOUTH AFRICAN EQUITY
Locally, markets have followed the general 3.00% correction, seen globally, over the past two weeks. Among the recent weeks riddled by public holidays, thinner volumes were seen going through the JSE, especially on the run-up to elections and voting day. Steinhoff continue to slowly lift the veil on their clandestine ethics, through the presentation of historical results and audit reports to the public. On Tuesday evening, Steinhoff reported their 2017 financial year numbers which saw the correction of massive overstatement of key figures being done. This gave the shareholder more of a true feel for the company’s real operational performance, while still carrying some murky details.
The only real positive arising from Steinhoff’s results is that shareholders are finally beginning to see more transparency and honesty from the company, although the large write-offs, impairments and restatements will leave a bitter taste in their mouths. With inflated intangible issues largely addressed, future financial statements will paint a clearer picture of the path ahead for Steinhoff, particularly in terms of its operational ability.
Additionally, the current board of directors seems to be doing a decent job of ensuring that a full and accurate account of past wrongdoings is presented fairly to shareholders and stakeholders alike. The 2018 report, which should also be released within the next few months, may finally show the underlying shareholder the true colours of Steinhoff. The share was down around 20.00% on the day following the results release, opening up Friday’s trading day at R1.60
Here’s some of the bigger movers on the JSE for the 2019 year so far, as at Friday morning:
- Impala Platinum: up 53.74%
- Kumba Iron Ore: up 51.56%
- Lonmin: up 43.98%
- Tongaat Hulett: down 60.94%
- Rebosis Property Fund: down 50.56%
- Delta Property Fund: down 44.44%
THE WEEK AHEAD
The week ahead will largely be influenced by how the market swallow’s the tariffs imposed on China by Donald Trump, while from a local perspective, one should keep a keen eye on the unfolding political situation and official election results. Potential coalitions and the much anticipated appointment of the cabinet, by President Ramaphosa, will provide the general investor with a clearer sense of direction going forward, as Ramaphosa tries to steer South Africa’s vessel out of stormy seas.
On Friday morning the rand would’ve set investors back R14.33 per Greenback, R16.09 a euro and R18.65 a British pound.
So we will provide this weekly summary from Peregrine Treasury services, together with our Daily Investment Updates from PSG and we will continue to update our JSE Calendar Tracker Page daily with specific market and economic events readers should take note of.
Earlier in the week we covered Allan Gray's views on African Frontier markets such as Nigeria, where South African firms have had mixed results in entering and staying in the Nigerian market. While it is a large and lucractive market, regulators often seem all to eager to cash in on foreign companies and levy large fines on firms for a variety of reasons. Most notably is MTN which has regular run ins with regulators in Nigeria.
But for a better understanding of African frontier markets read Allal Gray's opinion piece here.
Read the full article here.
Earlier in the week we covered Allan Gray's views on African Frontier markets such as Nigeria, where South African firms have had mixed results in entering and staying in the Nigerian market. While it is a large and lucractive market, regulators often seem all to eager to cash in on foreign companies and levy large fines on firms for a variety of reasons. Most notably is MTN which has regular run ins with regulators in Nigeria.
But for a better understanding of African frontier markets read Allal Gray's opinion piece here.
Read the full article here.