In what was a rollercoaster week for equity markets, a positive reaction to a late recovery in crude oil prices and global stimulus hopes, saw much of last week’s losses in equity markets recouped and a number of shares managing to move out of severely oversold conditions.
In Europe, the European Central Bank (ECB) kept monetary policy unchanged, in line with consensus estimates. The press conference, which followed, aided a partial market rebound, after ECB president Mario Draghi hinted at the possibility of further stimulus at the next monetary policy meeting in March.
The expectation of further stimulus from the ECB adds to expectations of further monetary easing out of Japan (as soon as this week) and perhaps further easing measures from China in the near future as well.
Chinese Gross Domestic Product data (GDP) showed the rate of economic growth to have slowed to 6.8% in Q4 of 2015. The fourth quarter figure brings the yearly figure to 6.9%, the slowest pace of economic growth within the region since 1990 fuelling speculation of more easing to come.
While local data was overshadowed by concerns around global growth and the oil price, local trade sales and inflation data found most significance in terms of domestic economic data released for the week.
The headline CPI annual inflation rate in December 2015 was reported at 5.2%, which is 0.4% higher than the corresponding annual rate of 4.8% in November 2015. On average, prices increased by 0.3% between November 2015 and December 2015.
Measured in real terms (constant 2012 prices), retail trade sales increased by 3.9% year-on-year in November 2015.
Measured in nominal terms (current prices), South African wholesale trade sales increased by 6.7% in November 2015 compared with November 2014, while motor trade sales increased by 2.8% year-on-year in November 2015.
In the gainers list, Anglo American Platinum (Amplats) leads the chart reacting positively to the outcomes of ECB press conference. The company also received news in the week that the Sibanye Gold Limited shareholder vote was overwhelmingly in favour of the proposed acquisition of Amplats’ Rustenburg assets. Both companies now await the approval of South African competition authorities before proceeding with the deal.
- Petroleum -5%
- Copper -6%
- Iron ore +4%
- Metallurgical coal -3%
- Energy coal -3%
The extent of declines in the decliners’ list were minimal at the end of the week, as a general market rebound moved shares firmly off their worst levels of the week. Within the decliners’ list there was no new stock-specific news to catalyse the respective moves, although Mr Price continues to suffer the consequence of a weaker-than-expected trading statement released in the week preceding.
The new week
The conclusion of the South African Reserve Bank’s (Sarb’s) monetary policy committee meeting will see the latest decision on lending rates being announced on Thursday. Expectations are for a 0.25% to 0.50% increase in the repo rate.
The state of global economic growth will be reassessed when the UK reports fourth quarter (Q4) 2015 preliminary GDP data on Thursday and the US reports Q4 2015 advance GDP data on Friday.