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Weekly Market Focus - 25 February 2019

Markets

WEEKLY FOCUS: US and China called to power global growth like in 2015                                   25 February 2019
 

 

The move higher in major equity indices continued last week and commodity prices also maintained their upward momentum. Major US indices such as the Nasdaq and the DJIA have risen 9 weeks in a row and more than 90% of stocks within the S&P500 are above their 50 day moving average. While a near term consolidation has a high probability, the FED’s minutes released last week indicating that balance sheet reduction* should end this year is a strong positive catalyst for the long term.  (*This is a non-consensus call which we had made in our previous newsletters)

 

The blended earnings growth rate for the S&P500 for Q4 2018 is 13% according to Factset data. The net profit margin will start retracing from a high and is estimated to be 10.8% for Q1 2019, understandably led by the technology and communications sector which have steep comparative base effects. The earnings growth estimated by analysts for Q1 is negative 2.7%, a significant drop from the 3% expected at the start of the year. While this will gather media attention, it is important to note that they are measuring the growth in profits and corporate profits are still healthy.

 

Preliminary manufacturing PMIs show that European growth is tracking China’s trend which seems to be leading the global industrial cycle. Interestingly China has a strong correlation with the US – chart above. Improvement in bank lending, in the export orders component of the manufacturing PMI and a pick-up in metal prices are signs of a rebound in the Chinese economy which is however still dealing with the aftermath of its phenomenal easing of 4 trillion Yuan in 2008. The current situation resembles more the 2015/16 scenario when a downturn led to easing in the US and China and this powered the global economy for 3 years.

 

 

 

 

 

 

 

 

 

 

 

 

Value

Week

YTD

Equity Indices

 

 

 

S&P500

2,793

0.62%

12.35%

S. Africa

3,391

2.53%

4.42%

Euro Stoxx50

3,271

1.07%

9.27%

FTSE100

7,179

-0.80%

6.60%

DAX

11,458

1.40%

8.51%

CAC40

5,216

1.22%

11.48%

Swiss Mkt.

9,349

1.16%

10.91%

FTSE MIB

20,263

0.25%

10.58%

Shanghai Comp

2,804

4.54%

12.44%

BSE Sensex

35,871

0.17%

-0.57%

Nikkei

21,426

2.51%

7.05%

Major currencies

 

 

 

USDZAR

14.00

-0.60%

-2.99%

EURUSD

1.13

0.42%

-0.83%

GBPUSD

1.31

1.26%

2.73%

USDCHF

1.00

-0.47%

1.65%

EURCHF

1.13

-0.05%

0.75%

USDJPY

110.69

0.17%

0.37%

EURGBP

0.87

-0.82%

-3.49%

USDAUD

1.40

0.26%

-1.18%

Dollar Index

96.37

-0.39%

0.42%

Commodities 

 

 

 

Brent

67.12

1.31%

28.58%

WTI Oil

57.26

3.00%

26.32%

Copper

2.95

5.43%

10.03%

Aluminum

1,897.50

3.70%

2.78%

Platinum

845.45

4.56%

6.99%

Sugar

13.37

1.75%

7.91%

Corn

375.25

0.13%

-0.07%

Coffee

96.45

-1.53%

-4.46%

Gold

1,332.80

0.81%

3.37%

Cotton

72.92

3.85%

0.90%

 Sovereign Yields

 

 

 

US10Y

2.65

(0.01)

(0.06)

UK10Y

1.16

0.00

(0.11)

Germany10Y

0.09

(0.01)

(0.14)

 

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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