Stocks finished higher this week. After recent gains, the S&P 500 is now up 10.4% from its December low. The main drivers of the market rebound have been optimism around U.S.-China trade talks, some backpedalling from the Federal Reserve on its interest rate trajectory, and oversold conditions.

On the trade war front, the U.S. and China begin their first face-to-face talks in Beijing this week, since the two nations agreed to a 90-day truce last month with President Donald Trump also likely to hold talks with Wang Qishan, China’s vice president, at the World Economic Forum later this month. Some encouraging comments reached the press about the prospect of reaching a trade deal.

Federal Reserve Chairman Jerome Powell reiterated on Thursday that the U.S. Central Bank would be patient in raising interest rates this year after raising them four times last year. Minutes of the FOMC’s December meeting acknowledged that the policy path ahead is “less clear”, stating that the policymakers will wait to deliver more interest rate hikes until they have a better handle on whether slowing global growth and financial market volatility will undercut an otherwise solid U.S. economic outlook.

China stepped up its fiscal spending to counteract a slowdown in its economy after approving a new $125 billion rail project. It will also roll out measures to boost consumption of cars and household appliances. Chinese CPI increased by 1.9%, compared with an increase of 2.2% in the prior month. Markets were expecting CPI to increase by 2.1%.

For the week, global equities were stronger. In the U.S., the Dow Jones (+2.40%), S&P 500 (+2.54%) and NASDAQ (+3.45%) all had a strong week, whilst other global equity markets including the Euro Stoxx 50 (+0.93%), FTSE 100 (+1.18%), Nikkei 225 (+4.08%) and Shanghai (+1.55%) indices were also stronger.

Market Moves of the Week:

Source: FactSet

Locally, SA manufacturing rebounded in December after 9 months of contraction as new-sales and export orders improved. Absa Group Ltd.’s Purchasing Managers’ Index, rose to 50.7 from 49.5 in November. Business Confidence data came out lower at 95.2 (prior 96.1). This is still well above the low of 90.5 in 2018.

State owned enterprises (SOEs) continue to make headlines as restructuring measures get underway. Eskom is looking to cut costs by trimming top executive positions to 9 positions from 21. The next phase is to cut a 600-strong layer of managers by at least 70 percent. SAA secured a R3.5bn loan to keep it operating until March. The loan forms part of its R21.7 billion in loans to implement its turnaround strategy over the next three years. SA electricity production fell 0.2% on a year-on-year basis, in November whilst consumption increased by 0.9%.

According to an opinion poll conducted by Ipsos, the ANC appears on track to dominate its 6th straight national election in May as it continues to win back supporters alienated by former President Zuma. Of 3 571 adults interviewed face-to-face between October 23 and December 4 last year, 61% said they would vote for the ANC, while 14% said they would back the DA, 9% the EFF and 2% the IFP.

The JSE All Share Index ended the week 2.78% higher, with industrials (+3.40%), resources (+2.18%) and financials (+2.68%) all stronger. The rand strengthened (+0.95%), ending the week at R13.83 to the U.S. Dollar.

Chart of the Week:

Source: Standard Chartered. Seven of the world’s top 10 economies by 2030 will likely be current emerging markets. The prediction for a shake-up of the world’s gross domestic product rankings comes in new long-term forecasts by Standard Chartered Plc, which includes a projection for China to become the largest economy by 2020, using purchasing power parity exchange rates and nominal GDP. India will likely be larger than the U.S. in the same time period while Indonesia will break into the top 5 economies.

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Have a great week!

The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell or an indication of trading intent on behalf of any Strategiq product. Strategiq Capital is an authorised financial services provider (FSP 46624).