What's Happening in the Markets this Week


What's Happening in the Markets this Week

Published Date: 2020-09-14 | Source: INCE|Community | Author: Chris Gilmour

What's Happening in the Markets this Week

US weekly jobless claims were virtually static last week. Continuing claims totalled 13.385 million, an increase of 93,000 from the previous week.

Weekly jobless claims were worse than expected last week amid a glacial climb for the U.S. labour market from the damage wreaked by the ongoing pandemic.

The US Labor Department last Thu reported 884,000 first-time filings for unemployment insurance, compared with 850,000 expected by economists surveyed by Dow Jones. The total was unchanged from the previous week. And the chances of the US Congress managing to get bi-partisan agreement on a new federal stimulus package before the Nov presidential elections are dwindling. Senate Republicans last Thu failed to progress their substantially attenuated stimulus plan in the face of opposition by Democrats who called the measure inadequate.

The S&P 500 closed 2.5% down for the week at 3 340.97 3 426.96 on Fri 11 Sep. From its Feb 19 former peak of 3 386.15, the index has now fallen by 1.3%. It has risen by 49.3% from its Mar 23 closing low of 2 237.4. During the week, tech stocks were especially badly hit. FANGMAN stocks (Facebook, Apple, Netflix, Google, Microsoft, Amazon Nvidia) collectively have lost more than a trillion dollars in market capitalisation within a week but still account for over 25% of the total value of S&P 500 stocks.

The Chinese economic recovery continues apace, with new vehicle sales rising 11.6% year on year in Aug to 2.189m new vehicles. Sales of trucks, vans and other commercial vehicles rose by 41.6%, accounting for around a quarter of the market, while electric vehicle (EV) sales soared by 25.8% to 109,000 vehicles.

Overall, Chinese vehicle sales have fallen 9.7% from Jan to Aug and for the year as a whole are forecast to fall 11%. The European Central Bank (ECB) left the size of its stimulus programme and interest rates unchanged last week, driving the € higher. ECB governor Christine Lagarde said the ECB believed that existing stimulus measures were both "efficient and effective" while also playing down concerns over the appreciating € saying the bank would "monitor carefully" exchange rate movements.

Additionally, the ECB raised its 2020 GDP estimates expecting a -8% contraction for the year compared to -8.7% estimated in June. 2021 GDP estimates were changed only marginally and lowered from 5.2% to 5%.

terling weakened against major currencies on last week as relations between the UK and EU soured even further. Brussels gave Boris Johnson's government three weeks to drop plans to break international law regarding Northern Ireland's position in the Brexit deal. The Pound/Euro exchange rate fell over 3.4% last week, taking sterling back to a level last seen in mid-Mar. The pound also weakened against the dollar, shedding 1.8 cents to $1.2821- its lowest level since late July.

South African second quarter GDP figures were released on Tue Sep 8 and were far worse than generally anticipated. The quarter on quarter annualised figure was -51% against an expected +/- -40% and year on year contraction was -17.1%. This puts SA on a par with Malaysia and Italy, and slightly better than Mexico and France. Q2 GDP is back to where it was in Q2 2007. South Africa has a real mountain to climb in Q3 and beyond, and it is to be hoped that profound structural reform of the economy will assume top of mind in government thinking.

The JSE Alsi closed 4.1% up for the week at 56 088 on Fri 11 Sep. From its peak of 61 685 on 25 Jan 2018, the Alsi has now fallen by 9.1% and is out of correction territory. From its recent low point of 37 693 on Mar 19, the index has risen by 48.8%.

The Fragile Five + Russia
Country GDP Growth (%) Inflation (%) Unemployment (%) Interest Rates (%)
South Africa -17.1 3.2 30.1 9.31
Brazil -11.4 2.44 13.3 7.11
India -23.9 6.93 11.0 6.03
Indonesia -5.3 1.32 5.0 6.97
Turkey -9.9 11.8 13.4 13.09
Russia -8.5 3.6 6.3 6.2
Source: Trading Economics

JSE listed company results out this week;

  • 15 September 2020
    • Harmony, Comair, SA Corporate
    • 16 September 2020
      • Pan African Resources, Discovery, Motus
      • 17 September 2020
        • Woolworths, Gemfields, Remgro
        • 18 September
          • Caxton, Hyprop

          Economic data releases this week;

          • 16 September 2020
            • SA Retail Sales July, US Fed interest rate decision
          • 17 September 2020
            • SA Building Plans Passed July, SARB/MPC repo rate decision

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