Wall Street climbed for a third day yesterday with retailers and real estate companies lending support to market indexes. UK markets edged lower as a decline in utilities managed to offset a rise in the mining sector. Inflation data from the UK also showed that prices kept growing at 3% (a 5-year high) with the bulk of inflationary pressure coming from local services, but a drop in the petrol price capped overall inflation. Japan released GDP figures for the fourth quarter and managed to record the slightest of growth (0.1% over the quarter) that effectively makes this period of economic expansion the longest since the 1980’s.
South African News
SA markets surged yesterday, taking cues from the mining sector, which had positive corporate earnings and firmer precious metals prices to provide direction. A weaker rand also lent a hand to the sector following the ANC’s press conference where the party stated that it asked President Zuma to step down. The president has reportedly refused, which means that an official recall/vote of no confidence process must be followed. President Zuma is however expected to give his definitive answer this morning, but with so many conflicting reports circulating, it’s hard to anticipate what the sequence of events will be in the coming days. Data released yesterday showed that unemployment came down to 26.7% in the fourth quarter (from 27.7%).
Kumba Iron Ore [KIO] in its full year results indicated that revenue increased by 15.5% and diluted earnings per share surged 43%. The share price climbed in line with other mining companies with the investment case still not remaining strong enough for the steel industry despite last year’s improved performance.
Exxaro Resources [EXX] decided to declare a special dividend and shareholders immediately reacted, sending the share price 8% higher at one stage. At the close of trade, the share price had rallied 4.7%.
credit: Graph Provided by Sharenet Advanced Online Charts
The Day Ahead
The rand looks biased for further gains this morning and could receive a boost if President Zuma decides to step down. Global risk-on has also favoured emerging market currencies, but that could end today with the release of US inflation data. A higher than expected inflation print will likely see markets fall sharply again and be negative for the rand. The risk is two-way and the opposite could be true with rand strength potentially following a subdued inflation reading.
Key Results Out Today
SA Retail sales
EU GDP Q4
US Retail sales
Quote of the day
"The best executive is the one who has sense enough to pick good men to do what he wants done, and self-restraint enough to keep from meddling with them while they do it." - Theodore Roosevelt
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