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Weekly Market Focus - 04 February 2019

Markets

WEEKLY FOCUS: US FED starts transit to neutral territory                                                                      04 February 2019

 

 

Risks assets rose over the past week after the FED meeting and press conference of Chairman Powell. Manufacturing Purchasing Managers’ Indices (chart above), a leading indicator of GDP growth remains strong for most economies even if China remains under pressure. Jobs numbers released in the US last Friday were strong and wage growth is at cyclical highs.

 

The change in language in the minutes of the FED indicate that a previously proposed 2 hikes in interest rates for the year is being put on hold for now. This is a boost to the bond markets and will be a relief to those bond issuers which rely on rolling over their securities for funding. In a separate statement to the minutes the FED highlighted that its balance sheet reduction target of USD 50 billion per month could be altered depending on economic conditions. While this is an improvement on the December statement, the absence of the total amount to be offloaded is a ‘faux-pas’ as it leaves investors in the dark about the duration of tightening. Investors will be looking for clues in speeches by FED governors in the coming weeks.

 

The high level Chinese delegation which visited the US last week seems to have laid the groundwork for a deal this year. In Europe, an extension of the March Brexit deadline seems the most plausible scenario and will avert the chaos of a disorderly exit.

Factset data indicates a blended earnings growth rate of 12.4% for the S&P500 during the last quarter based on the reported figures of 46% of all companies. The market is not expensive as the 12 month forward PE ratio of 15.7 is below the 5 year average. As comparative base effects become steeper, we can expect the rate of growth of profits to slow in Q1 2019 but profits will still remain at elevated levels.

 

 

 

Value

Week

YTD

Equity Indices

 

 

 

S&P500

2,707

1.57%

8.88%

S. Africa

3,338

-0.91%

2.80%

Euro Stoxx50

3,171

0.31%

5.48%

FTSE100

7,020

3.10%

4.25%

DAX

11,181

-0.90%

5.89%

CAC40

5,019

1.90%

7.28%

Swiss Mkt.

8,996

0.83%

6.73%

FTSE MIB

19,577

-1.18%

6.84%

Shanghai Comp

2,618

0.63%

4.99%

BSE Sensex

36,469

1.23%

1.09%

Nikkei

20,788

0.07%

3.87%

Major currencies

 

 

 

USDZAR

13.32

-2.14%

-7.67%

EURUSD

1.15

0.36%

0.16%

GBPUSD

1.31

-0.89%

2.98%

USDCHF

1.00

0.26%

1.16%

EURCHF

1.14

0.65%

1.25%

USDJPY

109.50

-0.05%

-0.71%

EURGBP

0.88

1.35%

-2.72%

USDAUD

1.38

-0.94%

-2.84%

Dollar Index

95.30

-0.17%

-0.69%

 Commodities 

 

 

 

Brent

62.75

1.80%

20.21%

WTI Oil

55.26

2.92%

21.91%

Copper

2.77

1.61%

3.39%

Aluminum

1,867.25

-0.61%

1.14%

Platinum

825.90

0.64%

4.51%

Sugar

12.60

1.29%

1.69%

Corn

378.25

-0.53%

0.73%

Coffee

103.70

-2.90%

2.72%

Gold

1,322.10

1.37%

2.54%

Cotton

73.63

-0.73%

1.88%

 Sovereign Yields

 

 

 

US10Y

2.68

(0.07)

(0.03)

UK10Y

1.25

(0.06)

(0.02)

Germany10Y

0.17

(0.03)

(0.07)

 

Contact us: Durban +27 (0) 31 566 3365 | CPT +27 ( 0 ) 21 851 0920 | JHB +27 ( 0 ) 11 017 7230 | Email: enquiries@pegasuswm.com

Disclaimer: The research report has been prepared for information purposes and does not constitute an offer. While reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and the company accepts no liability whatsoever for any direct or consequential loss, including without limitation any loss of profits, arising from reliance on this report

 

 



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