Despite the holiday-shortened trading week, global equity markets remained extremely volatile. On Wednesday, U.S. markets staged one of the biggest daily gains in history with the S&P 500 Index rallying over 5 percent. Prior to this, the S&P 500 Index was down nearly 15 percent for December. A major catalyst for the daily move came from online retailing giant, Inc. who announced a record-breaking holiday season, with more items ordered worldwide than ever before. Since 1940, it has only occurred 19 times before, where the market rallied 5 percent on a single day.

For the week, U.S. markets ended stronger with the Dow Jones (+2.75%), S&P 500 (+2.86%) and NASDAQ (+3.97%) all ending positively, whilst the Euro Stoxx 50 (-0.47%), FTSE 100 (+0.19%), Nikkei 225 (-0.75%) and Shanghai (-0.89%) indices generally ended the week softer.

Market Moves of the Week:

Source: FactSet

The recent price swings are likely exaggerated by low trading volumes and liquidity during the holiday season. A lot of uncertainties remain including trade tensions, questions as to whether the global economy is slowing down; and Brexit, but economic and corporate fundamentals remain solid. U.S. corporate earnings rose by about 20 percent in 2018, the strongest growth in eight years, and are expected to rise again in the coming year.

On the U.S. China trade war front, some positive developments emerged during the week, following reports that the U.S. is expected to send a delegation to hold talks with Chinese officials during the week of January 7. China is also set to remove export tariffs on 94 U.S. items from 1 Jan 2019.

About 25 percent of the U.S. federal government remains on shut down since Dec. 21 due to the Republicans and Democrats not agreeing on passing the U.S. Mexico border wall. Trump initially demanded $5 billion for the wall, but the White House offered a deal for about half of that amount. Democrats rejected it, refusing to go above $1.3 billion in border security funding that would not include a wall.

Locally, the rand firmed against the U.S. dollar on Friday, after data showed that South Africa swung into a 3.49-billion-rand trade surplus in November. Judge Dennis Davis, head of SA’s Davis Tax Committee, also announced that he is seeking an investigation into base erosion and profit shifting, estimated to be robbing the SA fiscus of as much as R7b a year. The Judge said recent studies have shown that profit shifting by multinationals was a significant leakage in the system.

The JSE All Share Index ended the week 1.97% higher, with industrials (+1.76%) and resources (+2.02%) and financials (+2.66%) all stronger. The rand strengthened (+1.41%), ending the week at R14.43 to the U.S. Dollar.

Chart of the Week:

On Wednesday, the S&P 500 Index rallied 5 percent, the Dow Jones Industrial Average added 1,086 points, and the Nasdaq had its best day since 2009. Wednesday was the first time ever, according to data compiled by Bloomberg that stretches back to 1990, in which more than 500 stocks in the S&P 500 finished positive, with 99.8 percent of stocks advancing. (There are 505 stocks in the S&P 500.)

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Have a great week!

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