US markets traded mixed yesterday with industrials falling, but technology giants bucked the trend and pushed the tech-dominated NASDAQ Composite Index higher for the day. UK markets halted a winning streak that stretched five days with mining companies experiencing some selling pressure due to falling commodity prices. Markets are cautiously waiting on US inflation data due to be released later this afternoon. Asian markets are trading slightly lower and economic data released in Japan this morning shows producer prices are easing, an indication that the Japanese economy is struggling to gather pace.
South African News
SA markets edged higher thanks to strength in the banking sector, but a lack of direction meant that volumes were low. Traders will look for direction from US inflation data today and later in the week we have local futures close-out and an index rebalancing that is likely going to pump up the trading volume. Finance Minister, Nhlanhla Nene, has made the turnaround of SAA a priority and now it finally looks like there is a plan of action. SAA expects to break even in three years and has started reducing flights to unprofitable routes and sold unnecessary planes to Mango, its low-cost carrier that is making money. If this plan succeeds then SAA may contribute to the government’s revenue rather than swallowing up tax payers’ contributions.
Grand Parade Investments [GPL], which operates Grand West Casino, has said in its interim trading statement that earnings likely more than halved from the previous year. Headline earnings per share was higher, coming from a low base.
Rand Merchant Investments [RMI] released its interim results and the numbers paint a reasonable picture. Income edged higher while headline earnings increased 26% and the company decided to pay a dividend to its shareholders.
credit: Graph Provided by Sharenet Advanced Online Charts
The Day Ahead
The focus this afternoon is US inflation, which can swing markets. A higher than expected figure would cause markets to adjust expectations to four rate hikes for the year. This scenario should see equity markets decline sharply while the dollar rallies. A figure below estimates should have the opposite effect and push equity markets higher. We have seen data shaping rate hike expectations have a significant impact on global markets, which means South African markets are likely going to track the direction taken by Wall Street. Locally we have manufacturing activity to look forward to, but this will play second fiddle to US inflation.
Key Results Out Today
SA Manufacturing PMI
Quote of the day
"The price of greatness is responsibility." - Winston Churchill
Quantitative Investment Analyst
Ian Stiglingh is a full time quantitative analyst, responsible for research of equities across all industries. Ian completed his degree in Mathematical Science in 2013 and his Honours degree in Financial Risk Management in 2014, both at the University of Stellenbosch. During his studies, Ian worked as an intern at Old Mutual Actuaries & Consultants as well as J.P. Morgan in Johannesburg, and is currently a CFA candidate