Vaccine hopes and US stimulation boost markets
By Dr Chris Harmse
FINANCIAL markets locally and globally advanced last week as more certainty around Covid-19 vaccination programmes boosted market sentiment, especially for risky assets like equities and emerging market bonds.
The jobs report in the US, reporting fewer payrolls, bolstered the case for President Joe Biden’s proposed coronavirus stimulation package.
The S&P opened Friday higher for the fifth consecutive day and had its best week since November 2020, gaining more than 3.2 percent. The Dow Jones increased by 2.5 percent and the Nasdaq was up 3.9 percengt.
Us equities were also bolstered by stronger-than-expected corporate results and expected earnings. Expectations had shifted away from previous indications of negative earnings during the first quarter towards a strong recovery and that companies were now on track to post earnings growth.
China stocks also ended higher last week as investors found support for continued economic recovery.
Thailand, Philippines and South Korean benchmark indices gained about 1 percent, in line with gains in the broader markets, as progress in vaccine distribution led to hopes for further normalisation in the global economic recovery.
In South Africa, the arrival of the first 1 million Covid-19 doses last week, as well as the positive global markets, boosted the JSE shares and bond markets in line with global sentiment and risky demand for emerging market assets.
The sentiment on the vaccine rollout was a big factor in the financial and listed property share boards on the JSE. The Fin15 traded 7.7 percent higher over the week. This was its highest level since the end of February last year.
The listed property index shot up by 4.9 percent to 276 points on Friday, its highest level since July 2020.
The all share index made up more than its losses of last week and closed Friday on a new record week close of 64 289.48 points as the index traded higher by 2.9 percent for the week.
The Industrial 25 index also recovered ending the week 2.75 percent higher. The lower prices for gold and other resources, as well as the stronger rand, contributed to the Resource index ending the week largely unchanged, gaining a only 0.5 percent.
The rand recovered somewhat last week. Against the the dollar, the local currency gained 8 cents, and was on Friday evening trading Friday around R14.90 to the greenback.
Against the pound, the rand improved by 13c to R20.47 and against the euro it appreciated by 32c to R17.92.
Brent crude price increased sharply last week from $54.98 a barrel to around $59.55 on Friday. This was an increase of about $4.57 (8.3 percent), indicating the growing as well as supply constraints in the Middle East.
The gold price dropped by $52 over the week to $1807 an ounce, while the platinum price gained $32 to $1 133 an ounce.
On the capital market, the R186 shorter duration bond gained 0.5 percent to close at 6.66 percent.
Meanwhile, this week all eyes will be on more news regarding the Covid-19 vaccine rollout in South Africa.
StatsSA will release the mining and manufacturing production data for December on Thursday. It is expected that both will show a continuous decline on last year’s level of minus 14 percent and minus 6 percent, respectively.
President Ramaphosa will deliver his State of the Nation Address (Sona) on Thursday evening. Analysts will await his take on the proposed economic recovery plan, the government debt and wage bill issues, financing of the Covid19 vaccine programme and government stance on former President Jacob Zuma and other ANC leaders on corruption charges.
Globally, investors will look out for the release of the UK’s preliminary gross domestic product growth rate for 2020 quarter two. China, Germany, and the US will publish their latest inflation rate figures.
Dr Chris Harmse: Economist of CH Economics (Pty) Ltd
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