🇿🇦 Local Market Indicators & News Highlights
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🌟SARB Introduces New Inflation Measure to Aid Policy Decisions
SARB has introduced a new inflation measure, called "supercore inflation," designed to monitor underlying price developments that are influenced by general economic conditions and sensitive to the business cycle. This new measure will assist policymakers in distinguishing between temporary inflationary pressures and more persistent trends, enhancing the formulation of monetary policy.
This development could support the case for the SARB’s Monetary Policy Committee (MPC) to consider cutting interest rates as early as September. The key interest rate has been at a 15-year high of 8.25% since mid-2023, and the SARB now expects inflation to moderate to 4.3% by the last quarter of 2024.
🌟Manufacturing Production Drops 5.2% YoY in June
Manufacturing production in South Africa contracted by 5.2% year-on-year in June, a sharper decline than the 1.2% fall recorded in May. This result was worse than expected, with forecasts and market consensus predicting smaller decreases of around 0.8% and 0.9%. The contraction is notable despite the absence of power shortages, suggesting ongoing challenges in the domestic and global environment.
Key sectors like ‘basic iron and steel, non-ferrous metal products, and machinery,’ along with ‘motor vehicles and parts,’ and ‘food and beverages,’ contributed significantly to the overall decline. Monthly production also decreased by 0.5% in June, following a 3.6% drop in May.
Despite these setbacks, the industry saw a 0.9% quarter-on-quarter growth in Q2, recovering from a 1.2% contraction in Q1. Positive contributions came from motor vehicles, parts, and accessories, along with basic iron and steel.
Looking ahead, improvements in electricity production and a recovery in domestic and global demand, supported by moderating inflation and easing monetary policy, are expected to boost manufacturing for the rest of the year.
🌟 JSE Resilient in H1 2024 Amid Challenges
The JSE reported a net profit after tax of R493 million and 606 cents per share in H1 2024, showing strength despite tough economic conditions. Operating income rose 4.2%, with strong gains in JSE Investor Services (+28.9%), commodity derivatives (+24.7%), and bonds/interest rate trading (+7.8%).
CEO Leila Fourie emphasized diversification, noting that non-trading income now makes up 39% of operating income. Growth in sustainability products was notable, with eight new bonds and a doubling of actively managed ETFs.
The JSE is advancing in data, sustainability, and tech, including a core market data-to-cloud transition and developing central clearing for bond trading. The outlook remains positive, driven by increased trading and strategic diversification.
🌟 Glencore Reverses Coal Spinoff Plan
Glencore has decided to retain its coal business after shareholder pushback, abandoning plans to spin off the unit. Despite global pressure to reduce coal reliance, the company will continue leveraging coal profits to fund growth in metals needed for the energy transition.
CEO Gary Nagle cited investor support and shifts in the ESG landscape as key reasons for the decision. Glencore's coal operations remain highly profitable, especially amid global energy crises.
For the first half of 2024, Glencore reported revenue of $117.1 billion, up 9% from the same period in 2023. However, adjusted EBITDA dropped 33% to $6.3 billion, and adjusted EBIT fell 55% to $2.9 billion. The company posted a net loss of $233 million, compared to a net income of $4.6 billion in H1 2023.
🌍 Global Market Indicators & News Highlights
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🇺🇸 United States: Volatile Markets Amid Growth Concerns
Market Volatility: Major U.S. indexes closed slightly lower after a volatile week, with the S&P 500 nearing correction territory. The Nasdaq Composite fell over 15% from its peak, while the VIX spiked to its highest level since March 2020 before settling.
Mixed Consumer Signals: Companies like Airbnb and Disney reported weakening consumer demand, while data from S&P Global showed the services sector still expanding. Jobless claims dropped, contributing to a brief market rally.
Rising Yields: The 10-year Treasury yield increased as fears of a weakening labor market eased. The Fed’s reverse repo facility saw its lowest asset levels in over three years, indicating favourable funding conditions.
🇪🇺 Europe: Stocks Recover Amid Economic Uncertainty
Mixed Market Performance: The STOXX Europe 600 Index ended 1.16% higher after recovering from sharp losses earlier in the week. Germany’s DAX and France’s CAC 40 posted slight gains, while Italy’s FTSE MIB declined.
Rising Bond Yields: Eurozone government bond yields rose following a global market rout earlier in the week, partly driven by growth concerns. Improved U.S. jobless claims data helped stabilise the market.
Weak Retail Sales: Eurozone retail sales fell 0.3% in June, reflecting ongoing consumer struggles with inflation. However, German industrial output and orders exceeded expectations, signalling some resilience.
🇬🇧United Kingdom: Housing Market Improves Amid Economic Volatility
Stocks Close Lower: The FTSE 100 and FTSE 250 indexes ended the week with losses despite gains on Friday, driven by positive U.S. jobs data and optimism in the housing sector.
Housing Market Sentiment Rises: UK housing market sentiment improved in July, with expectations for sales reaching their highest level since January 2020. House prices also saw a 0.8% increase in July.
Rate-Sensitive Sectors Gain: Homebuilders and real estate sectors performed well, buoyed by the Bank of England’s rate cut and new government planning reforms. However, personal care and luxury sectors led declines.
🇯🇵 Japan: Market Rebound After Initial Sell-Off
Severe Initial Losses: Japan’s stock markets experienced a significant sell-off early in the week due to a rebounding yen and concerns over global growth. The Nikkei 225 and TOPIX Indexes recovered somewhat, closing the week down 0.64% and 0.2%, respectively.
BoJ Eases Rate Hike Fears: Dovish comments from BoJ Deputy Governor Shinichi Uchida calmed fears of further rate hikes, helping to stabilize markets. The yen weakened slightly, easing pressure on export-oriented companies.
Rising Wage Growth: June wage growth surprised to the upside, with a 4.5% year-on-year increase driven by summer bonuses. This bolstered expectations for future policy tightening by the BoJ.
🇨🇳 China: Mixed Economic Data Leads to Stock Market Volatility
Stock Market Declines: The Shanghai Composite Index fell 0.94%, and the CSI 300 lost 1.56%, while the Hang Seng Index in Hong Kong gained 2.48%. Concerns over deflationary pressures weighed on sentiment.
Rising Consumer Prices: China’s consumer price index rose 0.5% year-on-year in July, driven by seasonal factors. However, core inflation slowed to its lowest level since January, and the producer price index remained in decline.
Mixed PMI Readings: The Caixin services PMI rose to 52.1 in July, but the composite PMI softened to 51.2 due to a contraction in manufacturing. The data highlighted the uneven growth in China’s economy amid a prolonged property slump and weak domestic consumption.