Global equities slipped in the past week as concerns of weakening global economies surfaced. The S&P 500, Dow Jones and Nasdaq all declined by 2.16%, 2.21% and 2.46%, respectively. The US 10-year Treasury note declined to 2.62% from 2.76% the week before, reflecting global concerns about economic growth.
The key themes over the week included, the ECB’s announcement of new stimulus measures, US hiring growth slowing in February, the OECD cutting the global growth forecast and a Brexit withdrawal vote is to take place on Tuesday.
The European Central Bank has revealed new plans to stimulate growth in a slowing European economy. This comes only three months after the ECB cut its $2.90 trillion bond buyback program. The ECB announced that in September it will launch a series of targeted long-term refinancing operations – cheap long-term loans for banks – and keep interest rates constant throughout 2019, in order to stimulate growth in the region. The economy grew 1.10% in the fourth quarter of 2018, down from 1.60% in the third quarter.
In February, US nonfarm payrolls slowed considerably, with a print of only 20,000.00, despite the fact that the unemployment rate fell to 3.80%. Jobs were expected to grow by 180,000.00. Although, when averaging January and February nonfarm payrolls the change was 165,000.00, in line with the business cycles’ average.
The Organization for Economic Cooperation and Development forecasts that the global economy will grow by 3.30% in 2019 and 3.40% in 2020, which is lower by 0.20% and 0.10%, respectively, than November’s forecast. The organization says the global economy is being impacted by policy uncertainty and ongoing trade tensions.
In Brexit news, Theresa May faces a Brexit withdrawal agreement vote on Tuesday. Government sources believe that she will lose the vote, and if the vote is defeated, Parliament will vote on whether to take “No Deal” off the table on Wednesday. If Parliament votes against a “No Deal” Brexit, a vote to extend the Article 50 period will take place – delaying the UK’s exit from the European Union.
Market Moves of the Week:
Domestic markets also felt the impact from slowing global economies with all major indices ending the week softer. The JSE All Share closed the week 1.27% lower but was still up over 5.00% for the year. Financials were down by 2.52% on the back of the South African GDP print, earnings releases, as well as a stronger US-dollar, as a result the rand depreciated by 1.55% relative to the greenback over the week.
The South African economy expanded by 1.40% in the fourth quarter of 2018. Economists polled by Thomson Reuters expected the economy to grow by 1.60% for the period. On an annual basis, the economy grew by 0.80%. South Africa’s central bank still expects the economy to grow by 1.70% and 2.00% in 2019 and 2020, respectively.
South Africa’s business confidence deteriorated in February, amid continued political and policy uncertainty. The index fell to 93.40 from 95.10 in January, the lowest reading since September.
Chart of the Week:
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