The biggest issues of the last week were the fact that precious metals got sold off due to dollar strength and the upcoming Fed meeting on Wednesday – where there is a strong suspicion of a rate hike. South African politics is currently as colourful as ever with politicians tap dancing around the blame conspiring over the 1 April grant payouts – with all the absurdity it’s hopeful that this is an elaborate April fool’s joke.
Global News:
- In February, the US added an impressive 235 000 non-farm payrolls, beating market expectations, while unemployment fell from 4.8% to 4.7%
- The Republicans have presented their answer to Obamacare to a very underwhelmed America. Due to healthcare being the focus of the current Trump administration, it is thought that there is going to be a delay in infrastructure spending to 2018. This will hinder the pickup in demand in commodities.
- The Eurozone economies have generally displayed robust growth this year. The trend appears to continue, with a sharp improvement in German Industrial Production to 2.8% growth in January, up from a 3% contraction in December 2016. German exports showed a similar turnaround, rising from a 3.3% contraction in December to a 2.7% positive increase in January. German PMIs remain strong, currently at 54.1.
- Although the French economy has been impressive in recent months, economic news released this week disappointed markets somewhat. Industrial production fell 0.3% in January (vs positive 0.5% growth expected), after falling 0.9% in December last year. Manufacturing Production declined by 1%, after a 0.8% fall in December. The most impressive numbers this week were released in Spain, where Industrial Production gained 7.1% year-on-year.
- In the second half of 2016, China showed a strong turnaround in growth. Chinese imports are up a massive 45% year-on-year, indicating the resilience of the Chinese consumer.
Local News:
- The CFO of BHP, Peter Beaven, hinted that Chinese infrastructure spending in 2017 is likely to deflate from its 2016 stimulus – putting further pressure on the demand for commodities in 2017.
- Following this, there has been a significant correction in mining shares, BHP and Anglo American have dropped by up to 20%, and Sasol has fallen by 16%.
- The JSE Mining Index lost 6.25% last week, year-to-date it is down 5%, this is compared to the fact that it was up 16% in February 2017. This means that it is back to where it was in April last year.
- The JSE Resource Index was up 13% in late January and now is at -4%. Many commodity prices fell including iron ore and copper, but precious metals were hit hardest.
- SA GDP contracted by 0.3% quarter-on-quarter, seasonally adjusted and annualised in Q4 2016, which was slightly worse than the market’s expectation for 0%. This is the lowest growth rate since the 2008 financial crisis. The annual increase was a positive 0.3% for 2016, which means the country has avoided a recession.
- Asset class performances for 2017: the JSE ALSI is up +1.6%, the ALBI has gained 3.4%, SA Listed Property +2.9%, and Cash is up 1.4%. Cash did well last year; it is interesting to see that it is trailing behind the pack
Source: Dynasty, Stanlib, Efficient Select, Prescient, Moneyweb & Bloomberg Markets etc.
