The Week Ahead of 18 March 2019

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The Week Ahead of 18 March 2019

Published Date: 2019-03-19 | Source: INCE|Community | Author: Chris Gilmour

The Week Ahead of 18 March 2019

The S&P 500 rose by 2.9% to close at a 2019 high of 2822.5. It is now 20% higher than at its low point on Christmas Eve 2018 and only 3.7% below its all-time high of 2931 set on Sep 20 2018. Next week will be pivotal in determining the direction of the S&P 500 in the short term. US corporate earnings have been good but not exciting and the market is being propped up mainly by bullish sentiment that interest rates will remain benign this year. The FOMC meeting next week will provide some colour on the likely direction of interest rates, which in turn will impact on the strength of the equity market. If the Fed gives out a dovish tone on Wed 20 Mar, expect the S&P 500 to go higher in response. Longer term, the US market remains vulnerable. It is the longest-lasting bull market in history and is tired. It needs to be fed by a constant drip of good news and absent that good news, will likely succumb to selling pressure.

After two failed votes on British PM Theresa May's Withdrawal Agreement (WA), the House of Commons (HoC) voted 412 to 202 to support May's proposal for a short-term extension until Jun 30 if the WA can be passed by Mar 20. If the WA is rejected for the third time, the UK may request an extension, the downside of which is that it would have to participate in European Parliament elections in May. It is not a given that the speaker of the HoC will allow a third vote on the WA. According to Erskine May, the document that governs HoC protocol, the speaker has the discretion to disallow a motion if he feels that the substance contained therein has not changed materially from a previous failed motion. Additionally, the European Union may not allow any extension to Brexit, though EU Council President Donald Tusk has hinted that a longer extension might be considered if the UK held a second referendum on the Brexit issue. Expect the GB pound to remain very volatile until some clarity emerges on the UK's Brexit position. The Bank of England's Monetary Policy Committee votes on Thu 21 Mar on whether or not to raise UK interest rates. Expect rates to remain on hold.

Eskom implemented stage 4 loadshedding on Sat afternoon, citing transmission line problems carrying electricity from the Cahora Bassa hydroelectric scheme in Mozambique. Loadshedding is likely to continue into the middle of next week.

PwC released its long-awaited forensic report on Steinhoff last Fri. Only the executive summary ha been made available to the public and we wait to see how much of the full report will be released by Steinhoff management. The JSE All Share Index rose by 1.2% to close at 56 040 on Fri 15 Mar.

JSE listed company results out this week;

  • 18 March 2019
    • Ascendis - Interim
  • 19 March 2019
    • Sasfin - Interim

    Economic data releases this week;

    • 20 March 2019
      • SA CPI February, SA Retail Sales January
      • 20 March 2019
        • FOMC Rate Decision

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