Monday’s Bullseye: 13 September 2021

The week ahead features CPI and retail sales reports from the US and UK, as well as some market moving data from the likes of China (retail sales and industrial production), Australia (employment report) and New Zealand (GDP). FX traders should be kept busy. Seen the macroeconomic highlights below. In the week that is about to end, investors bought dollars at the start of the week, before selling it towards the end of the week, leaving the dollar index slightly positive at the time of writing. Similar moves were observed in the bond market, with yields rising initially before dipping towards the end of the week. Stock indices also bounced off their lows as we headed towards the weekend.
 
Helping sentiment was news on Thursday that US President Joe Biden and Chinese leader Xi Jinping held a phone call. This led to speculation of truce between the two nations, after relations had come under significant strain under the Trump administration. The Chinese yuan rallied, which helped to provide tailwind support to other EM currencies, as well as the Aussie and Kiwi dollars.
 
The fact that ECB was adamant that the reduced purchases under the PEPP was merely a “recalibration” rather than a “taper,” eased concerns about central bank stimulus being reduced.
 
Earlier in the week, the market had taken a more cautious turn in its analysis of global economic data, the tone of global central banks on when stimulus will be retracted, and ongoing uncertainty caused by the Delta variant of Covid. This had left the markets in limbo, leading to directionless prices for stocks, crude oil and foreign currencies. Some of the major US and other global indices struggled, albeit they didn’t retreat too far from their recent all-time highs, while some indices like the Japanese Nikkei have had another good week.
 
Overall, it appears as though the markets’ analysis of upcoming risks have become rather hazy as there are many unknowns. Watching some stocks reach fresh all-time highs, while the bottom drops out for some, this market requires caution before any major decisions are made. Selective stock picking will require thorough analysis. Buying dips in this market should not be the default setting as the market conditions have rightly changed – at least for now.

Indeed, a couple of major global indices have broken their long-term bullish trend lines, suggesting that perhaps the market is turning lower. Here, for example, is how the daily chart of the Dow looks like:


Source: ThinkMarkets and TradingView.com

Incoming data releases will be scrutinised closely going forward. After a long time, the FX markets are once again becoming data dependant as investors are trying to figure out which central bank is comparatively becoming more hawkish as we life continues to slowly turn back to normalcy.
 
 
Macroeconomic highlights
 
Tuesday

 
South African Markets in Focus
By Kearabilwe Nonyana
 
Our local JSE TOP 40 looked set to end the week lower than the previous week by more than 2%, with most of the losses coming from the heavyweight stocks like Naspers. The economic calendar for the week ahead will be very light, with only two key exceptions.
 
Mining Production sales
 
On the 14 of September a record current account surplus which is above 300 billion is indicative of the strong export demand and low import demand which is indicative of the high commodity prices. It will be good to see which of the commodities have grown in production and sales and that will be indicative of which of the mining counters you could look at for investment or trading opportunities. At the top end profits are set to normalise in the sector after record earnings seasons because of the commodity price boom but I do believe the next interim results will still be above expectations.
 
Retails trade sales
 
Shoprite recently released an incredible set of results showing growth right across different LSM which was indicative of the power in additional disposable income of South African since the announcement in the commencement of the R350 grant for citizens by the Government. On the 15^th of September the retail trade sales numbers will be released by Stats SA. There should be an increase in the month-on-month number due to the lockdown restrictions being relaxed and this will also be indicative as to where the most spend by households will be.
 
Shoprite Holdings Daily Chart