As the United States celebrated Thanksgiving on Thursday, global markets experienced a more subdued week. Most stock markets have shown a decent recovery from this time last year. Artificial intelligence chipmaker NVIDIA, the sixth-largest global company by market capitalisation, reported its third-quarter earnings, exceeding expectations but provided cautious guidance amid export restrictions to China.

U.S. Black Friday spending showed consumer caution, hinting at a potentially subdued holiday season and lacklustre retailer earnings in early 2024. Unlike pandemic-driven splurges in previous years, spending didn’t maintain the same pace. Salesforce predicted a modest 1% growth in online U.S. sales for November and December, marking the slowest in at least five years.

At the same time, Federal Reserve minutes revealed a united front among policymakers to proceed cautiously on future interest-rate moves, emphasising progress toward their inflation goal and acknowledging the impact on households and businesses.

U.S. economic signals were mixed, with the Chicago Fed National Activity Index falling to -0.49 in October, and existing home sales dropping 4.1% month-on-month. Additionally, durable goods orders declined by 5.4% in October, marking the second-biggest decline since April 2020. On a positive note, MBA mortgage applications rose by 3.0% and initial jobless claims fell to 209.00K in the week ending November 17, exceeding market expectations.

At the same time, concerns about U.S. net national savings have risen, as the budget deficit and personal savings turned negative for the second time since 1947. Only 65.8% of surveyed individuals are confident in meeting an unexpected $2,000 expense within a month, according to the NY Fed.

ECB President Christine Lagarde stressed caution, stating it’s too early to declare victory over inflation. Despite some easing in energy and supply-chain shocks, labour markets are adjusting, and wages are rising. ECB officials, including Governing Council member Francois Villeroy de Galhau, ruled out near-term rate hikes but emphasised the ECB’s commitment to the 2% inflation target by 2025.

UK Chancellor Jeremy Hunt aims to stimulate business investment by £20 billion annually through measures, including 100% tax relief on investment spending by British businesses.

In Japan, the year-on-year national Consumer Price Index (CPI) saw a 3.3% increase in October, surpassing the 3.0% rise reported in the previous month.

Over $25 billion in foreign funds have exited the Chinese stock market, despite efforts to restore confidence. Regulators are working on a list of 50 developers eligible for financing to stabilise the property market, with Goldman strategists estimating a 42% default rate this year.

In the Netherlands, far-right politician Geert Wilders secured a resounding victory in recent elections, positioning his anti-EU Freedom Party to lead the country’s next government. Wilders advocates for a binding referendum on EU departure, withdrawal from international climate commitments, and a significant reduction in immigration.

The week concluded with mostly positive outcomes in global equity markets. In the U.S., the Dow Jones (+1.27%), S&P 500 (+1.00%), and Nasdaq (+0.89%) all showed gains. Similarly, European and Asian markets generally performed well, with positive movements in the Euro Stoxx 50 (+0.72%), Nikkei 225 (+0.12%), and Hang Seng (+0.55%) Indexes. Notably, the FTSE 100 (-0.21%) and Shanghai Composite Index (-0.43%) were the exceptions, showing slight declines.

Market Moves of the Week:

South Africa’s Consumer Price Index (CPI) increased to 5.9% YoY in October, exceeding market expectations. The monthly CPI increase of 0.9%, driven by higher food and fuel prices, further contributed to the unexpected inflation. Nevertheless, the South African Reserve Bank (SARB) maintained its key interest rate at 8.25%, in line with expectations.  Consensus expects headline inflation to retreat to its targeted 4.5% midpoint in the first half of 2024.

Economically, a Transnet backlog in Durban’s key port has caused a substantial financial loss, with around 71,000 containers stranded. Transnet predicts a clearance process until March 2024, highlighting the severity of the situation.

The JSE All-Share Index (+2.42%) was positive this week, driven higher by all three of the major sectors including the resource (+1.45%), industrial (+3.07%) and financial (+2.47%) sectors. By Friday close, the rand was trading at R18.82 to the U.S. Dollar.

Chart of the Week:

As winter approaches, the outlook for European natural gas prices seems optimistic, with recent pricing trends indicating a favourable scenario for the continent. Despite concerns, the mild winter in 2022 led to a collapse in natural gas prices. Thankfully, Europe appears well-prepared with alternatives, providing a more favourable situation this winter than previously anticipated. Source: Bloomberg

Investor anxiety has been heightened recently by the war in Ukraine and the escalation of geopolitical tensions in the Middle East. As such, we advise investors to maintain a calm stance during the crisis, diversify, and maintain exposure to long-term themes. Investors need to look beyond near-term news and gain exposure to industries benefiting from longer-term growth trends.

As always, we appreciate your support and value your trust in LNKD Investment Managers. 

Global equity markets experienced a rally over the week as investors processed slower inflation prints in various developed economies. The S&P 500 Index extended its strong gains from the previous two weeks, surpassing the 4,500 level for the first time since September.

In the United States, October’s core Consumer Price Index (CPI) rose by 0.23%, slightly below consensus and the prior three-month average. The year-on-year rate declined to 4.0%, with declines in auto categories contributing to the core decrease. Used car prices are expected to continue declining in the coming months. Notably, the sharp increase in owners’ equivalent rent inflation in September reversed in October. October retail sales declined by 0.1%, while core retail sales rose by 0.2%, and real core retail sales are estimated to have increased by 0.1%. The Producer Price Index (PPI) decreased by 0.5% in October, contrary to expectations.

The recent indications of cooling inflation contributed to a decline in long-term Treasury yields. The benchmark 10-year note reached an intraday low of around 4.40% on Friday, marking its lowest level since mid-September.

In legislative news, the House passed a bill known as a “continuing resolution” (CR) to extend government funding at current levels until the next quarter, likely to pass the Senate and be signed by the President.

In recent geopolitical developments, US President Joe Biden engaged in talks with his Chinese counterpart, Xi Jinping, resulting in progress towards repairing strained ties between the two nations. Agreements were reached to restore high-level military communications, address the issue of fentanyl, and initiate a dialogue on artificial intelligence. China characterized the discussions as a “candid and in-depth exchange of views,” emphasizing the significance of the US-China relationship as “the most important bilateral relationship in the world.” While Biden acknowledged the critical global challenges requiring joint leadership, he maintained his belief that Xi Jinping is a dictator, expressing a complex perspective on the Chinese leader.

ECB President Christine Lagarde stated that policymakers expect inflation to increase at the start of next year due to base effects, suggesting that even if inflation accelerates, another interest rate increase may not be necessary. Lagarde emphasized the belief that the current level, if maintained long enough, will guide the economy toward the 2% medium-term target. Vice President Luis de Guindos echoed this sentiment, rejecting market expectations for rate cuts and emphasizing a commitment to maintaining sufficiently restrictive monetary policy to bring inflation back to the target. Eurozone’s latest data confirmed a fall in the annual inflation rate to 2.9% in October, the lowest level since July 2021.

In October, China experienced better-than-expected consumer spending and injected the most cash into the financial system since late 2016. However, there is a challenging economic landscape with a mixed set of data. Retail sales growth and the services industry output index showed improvement, surpassing expectations. Industrial production also edged up, but fixed asset investment growth fell short of estimates. Notably, China’s home prices recorded the most significant decline in eight years in October, indicating a deepening property slump despite government efforts to stimulate demand. The Hang Seng Composite Index end the week in the green, up 1.62%, while the Shanghai Composite Index produced modest relative gains, up 0.51%.

In Japan, the domestic Corporate Goods Price Index (CGPI) declined for the second consecutive month in October, with a noticeable drop in materials sectors. Year-on-year, the index slowed sharply to +0.8%. The initial estimate for Q3 2023 real GDP growth was -2.1%, well below market expectations of -0.4%, driven by weak private sector demand and negative contributions from consumption. In October, year-on-year export value growth remained positive for the second straight month, while import value continued to decline, resulting in a narrowed trade deficit of -¥662.5 billion, smaller than expected. Japan’s Nikkei 225 Index produced strong performance this week, up 3.12%.

Risk on sentiment filtered through developed market equity markets this week, with positive performance across the regions. US stocks end higher, with the S&P 500 up 2.24%, the Dow Jones Industrial Average up 1.94%, and the tech heavy Nasdaq Composite closing, up 2.37%. Euro Stoxx 50 was the standout performer, ending the week with a stellar return of 3.42%, the FTSE 100 also closed the week up, 1.94%. Oil continued to decline, closing the week lower -1.30%, with Brent Crude Oil trading at 80,55 ($/bbl) at Friday’s close.

Market Moves of the Week:

In South Africa, employment has surpassed pre-pandemic levels, reaching 16.7 million in the three months through September. This growth was driven by the finance and community and social service sectors, according to data from Statistics South Africa. Additionally, the official jobless rate declined more than anticipated, dropping to 31.9% in the quarter from 32.6% in the previous three months.  

The local equity market took direction from global peers, with the JSE ALSI ending the week up 3.54%. All sectors were stronger, with Resources leading the market higher, up 7.37%. The rise in Iron ore prices benefited the resource counters, with the steelmaking ingredient trading at a near eight-month high. Industrials gained 2.49% for the week, while Financial were also up 1.86%. The Rand caught a bid this week, appreciating 1.97% against the greenback, to close the week at R18.36/$.  

Chart of the Week:

The US’s the interest bill rose significantly last month to start the fiscal year, and there are indications that it may continue to climb. The Treasuries market has been steadily growing and has now surpassed $26 trillion, representing an increase of over $10 trillion in the last five years. The continuous growth of the market and the higher interest bills contribute to the challenges, potentially leading to further spikes in Treasury yields and increased volatility. Source: US Department of Treasury, Bloomberg.

Investor anxiety has been heightened recently by the war in Ukraine and the escalation of geopolitical tensions in the Middle East. As such, we advise investors to maintain a calm stance during the crisis, diversify, and maintain exposure to long-term themes. Investors need to look beyond near-term news and gain exposure to industries benefiting from longer-term growth trends.

As always, we appreciate your support and value your trust in LNKD Investment Managers. 

In October, China experienced a return to deflation, underscoring the ongoing challenge of boosting growth through domestic demand. According to the National Bureau of Statistics, consumer prices declined by -0.2% (-0.1% expected) last month, following a near-zero trend in the preceding two months. Concurrently, producer prices continued their decline for the 13th consecutive month, registering a 2.6% decrease, slightly less than the estimated 2.7% decline. 

Benefiting from multiple rounds of fiscal and monetary stimulus, China saw an upward revision in its economic growth projections for 2023 and 2024 by the International Monetary Fund. The IMF anticipates that growth will surpass China’s 5% target for 2023, reaching 5.4% this year. However, it is expected to moderate to 4.6% in the following year due to subdued external demand and ongoing weaknesses in property markets. The revisions were made despite the backdrop of challenges, including a 6.4% decline in exports for October, marking the sixth consecutive monthly decrease, and the first decline in foreign direct investment since 1989.

Bank of England (BoE) Governor Andrew Bailey, addressing a central bank conference in Ireland, remarked that it was premature to discuss interest rate cuts. His comments followed BoE Chief Economist Huw Pill’s observation that financial markets anticipating an initial rate cut in August next year “doesn’t seem entirely unreasonable.” In other news, UK gross domestic product (GDP) in the third quarter matched the BoE’s forecast for zero growth, after expanding by 0.2% in the prior three months.

In the U.S., Jerome Powell cautioned markets this week, stating that the Federal Reserve is ready to implement further tightening measures as needed. He expressed a lack of confidence in the current policy stance, emphasizing the challenge of reaching the 2% inflation target. In response, market conditions tightened, resulting in higher bond yields and a stronger dollar, accompanied by a decline in equities. The market now anticipates the first rate cut by the Fed to happen in July of 2024 instead of June. There were very few economic data releases this week, and most were in line with expectations.

As of the latest data, almost 92% of the S&P 500 Index constituents have reported their Q3 2023 results. Blended earnings per share, which combines reported figures with estimates for yet-to-report companies, indicate a 4% increase compared to 2022’s corresponding quarter, as reported by FactSet. Additionally, year-over-year sales growth stands at 2.2%.

The major global indexes finished mixed for the week. The Nasdaq (+2.37%), the S&P 500 (+1.31%) and the Dow Jones ended the week higher, with upside earnings surprises from some technology-oriented firms providing support to growth indexes. The Euro Stoxx 50 managed a +0.54% gain after European Central Bank President Christine Lagarde said the ECB will not start cutting rates “in the next couple of quarters.” 

In the UK, the FTSE 100 dropped by -0.77%. Chinese equities rose as investors remained broadly unmoved by weak economic data, with the Shanghai Composite Index rising +0.27%. Japan’s Nikkei 225 rose by 1.93%, buoyed by robust corporate earnings, the government’s commitment to further economic stimulus, and ongoing currency tailwinds. Brent oil prices declined by -4.12%, while gold dropped by -2.72%. 

Market Moves of the Week:

In South Africa (SA), manufacturing production fell more than economists expected in September, falling -4.3% y/y (estimate -2.5%) from an expansion of +1.5% in August. The manufacturing sector continues to face lacklustre conditions with the headline Purchasing Managers’ Index (PMI) experiencing a significant decline in September, primarily driven by a sharp decrease in new sales orders. Additionally, early indications from the October PMI reading suggest that the index extended its move into contractionary territory. Although producers are gaining resilience against electricity shortages through private generation, overall activity is constrained by infrastructure bottlenecks, sluggish demand and increasing trade barriers.

SA mining production fell by -1.9% y/y (estimate -2.4%) in September, following August’s -2.0% y/y decline. Mining output is down -1.8% y/y year-to-date, reflecting poor growth within the coal, iron ore and platinum group metals (PGMs) divisions. Conversely, the gold division outperformed. Overall, the mining sector continues to face difficulties arising from an unstable energy supply, logistical constraints (Transnet), and diminishing external demand. Waning economic growth in both China and Europe has also hindered the export of critical commodities.

South Africa is set to fall short of its mandated 2030 carbon emissions targets outlined in the Paris climate agreement, according to three high-ranking government officials. The country’s intention to extend the operation of eight coal-fired power plants beyond the initially planned timeframe contributes to this shortfall. An official from the president’s office acknowledged, “Our models indicate that we will not achieve the 2030 target,” but also mentioned ongoing discussions about a new decommissioning goal for 2035. Despite this setback, South Africa remains committed to achieving net-zero emissions by 2050.

The JSE (-2.01%) dipped over the week with Resources (-6.59%) selling off. The rand weakened against the dollar, with the local currency ending at R18.73/$ from last week’s 18.25/$ level.

Chart of the Week:

The consumer price index slipped into deflation in July and has been teetering on and off the edge of negative year-on-year growth. While the People’s Bank of China said in August that prices would rebound from the summer rough patch, the latest data shows that assessment is overly optimistic. Source: Bloomberg.

Investor anxiety has been heightened recently by the war in Ukraine and the escalation of geopolitical tensions in the Middle East. As such, we advise investors to maintain a calm stance during the crisis, diversify, and maintain exposure to long-term themes. Investors need to look beyond near-term news and gain exposure to industries benefiting from longer-term growth trends.

As always, we appreciate your support and value your trust in LNKD Investments Managers. 

The U.S. economy saw job creation decelerate in October, confirming persistent expectations for a slowdown and possibly taking some heat off the Federal Reserve in its fight against inflation. Nonfarm payrolls increased by 150,000 for the month, the Bureau of Labor Statistics on Friday. This figure represents the lowest monthly addition since June and is slightly over half of the 297,000 jobs added in September. The unemployment rate saw a marginal uptick to 3.9%, marking its highest point since January 2022, though it remains relatively low in historical context. Hourly earnings experienced a modest increase of only 0.2%, the smallest increase since February 2022. These statistics, in part, reflect the impact of the United Autoworkers strike, which temporarily removed around 40,000 workers from the workforce, resulting in a reported decrease of 35,000 workers in the manufacturing sector. This hiring slowdown may also indicate that the Federal Reserve’s anti-inflation interest rate hikes, initiated in March 2022, are starting to exert a more noticeable influence on the economy.

Following this, the U.S. manufacturing sector experienced a significant contraction in October, despite showing signs of improvement in previous months. This decline was primarily driven by a significant drop in new orders and employment, likely influenced by strikes organized by the United Auto Workers (UAW) union against the three major car manufacturers in Detroit. The Institute for Supply Management (ISM) reported that the manufacturing Purchasing Managers’ Index (PMI) declined to 46.7 last month from September’s 49.0, the highest reading since November 2022. This marks the 12th consecutive month with a PMI below 50, indicating a contraction in the manufacturing sector. This extended period of contraction is the longest since the Great Recession of 2007-2009.

Concurrently, the growth of the US service sector slowed in October to its weakest pace in five months, driven by softer business activity and reduced hiring by employers. The Institute for Supply Management’s overall gauge of services declined by 1.8 points, marking the most significant drop since March, and stood at 51.8 last month, down from September’s 53.6. Over the past year, the index has shown fluctuations from month to month, but it has consistently stayed above the 50-point threshold, signifying expansion.

In its latest meeting, the US Federal Reserve (Fed) maintained interest rates at a 22-year high, while keeping the door open for potential further monetary tightening, driven by increasing signs of the enduring strength of the US economy. This marks the second consecutive meeting where the Federal Open Market Committee chose not to raise interest rates, as policymakers deliberate over the sufficiency of current monetary policy in addressing inflation concerns. With a total of 11 hikes since March 2022, the benchmark federal funds rate remains within the range of 5.25% to 5.5%. Federal Reserve Chair, Jay Powell, remarked that the substantial economic indicators, including a resilient labor market and unexpectedly strong consumer spending that drove accelerated GDP growth in the third quarter, may necessitate continued efforts by the central bank to meet its inflation target.

Similarly, during this week, the Bank of England maintained interest rates at a 15-year high and clarified that they do not anticipate any rate cuts in the near future. Despite acknowledging the economy’s vulnerability to a potential recession and projecting restrained growth in the coming years, the Bank of England emphasized their commitment to maintaining higher borrowing costs. In a 6-3 majority decision, the Monetary Policy Committee (MPC) chose to maintain the Bank Rate at 5.25%, repeating their decision from September after 14 consecutive increases. According to the meeting minutes, some members in opposition advocated for an additional quarter-point increase, aiming to address what they viewed as persistent upward pressures on prices. 

Eurozone inflation fell to 2.9% in October, a notable decline from the 4.3% recorded in September and marking its lowest point in over two years. This development has reinforced the anticipation that the European Central Bank is unlikely to implement further interest rate hikes. The primary factors contributing to this downturn are the third-quarter economic contraction within the Eurozone, accompanied by diminishing energy prices and reduced food inflation, as reported by Eurostat, the statistical agency of the European Union.

China faced an unexpected contraction in its manufacturing activity in October, shedding light on the formidable challenge ahead for policymakers striving to reinvigorate economic growth as the year draws to a close and 2024 looms, all while confronting various challenges both domestically and abroad. Despite recent positive signs indicating stabilization in the world’s second-largest economy, driven by a series of supportive policy measures, persistent issues such as a prolonged property crisis and subdued global demand continue to pose significant obstacles. According to data from the National Bureau of Statistics, the official purchasing managers’ index (PMI) dropped from 50.2 in September to 49.5 in October, falling below the critical 50-point threshold that signifies a shift from expansion to contraction. Furthermore, the non-manufacturing PMI also declined from 51.7 in September to 50.6 last month, signifying a slowdown in activity within the extensive service sector and construction industry.

The S&P 500 Index achieved its most substantial weekly increase in almost a year, boosted by indications of an economic slowdown and a Federal Reserve policy statement that was widely interpreted as dovish. The week concluded with the S&P 500 posting a significant weekly increase of +5.85%. Both the Dow Jones (+5.07%) and the tech-heavy Nasdaq Composite (+6.61%) also closed the week in positive territory. In Europe, the Euro Stoxx 50 and the UK’s FTSE 100 recorded gains of +3.99% and +0.99%, respectively. Meanwhile, Chinese stocks advanced as speculation that U.S. interest rates may have peaked countered broader concerns about China’s slowing growth. The Shanghai Composite Index increased by 0.43%, while the Hang Seng Index in Hong Kong rose by 1.65%. Similarly, Japan’s stock markets saw gains, with the Nikkei 225 Index concluding the week with a positive increase of +3.09%.

Market Moves of the Week:

South Africa’s Finance Minister is planning to introduce tax reforms in the coming year as part of an effort to restore stability to public finances that have been strained by declining mining revenue, as indicated in a mid-term budget review presented on Wednesday. The budget report provided to parliament anticipates wider deficits in the next three years and projects a higher peak in debt levels compared to February when the primary budget was presented. Finance Minister Enoch Godongwana has outlined the National Treasury’s intention to generate an additional R15 billion in tax revenue in 2024 to address revenue concerns. Additionally, the National Treasury has expressed a commitment to expenditure reductions, implementing moderate tax measures, and achieving efficiency gains through the consolidation or closure of public entities, some of which have required repeated financial support in recent years. 

Much like global markets, local equities in South Africa also saw positive movement. The JSE All-Share Index experienced significant gains of +4.90%, driven by strong performances in the financial (+8.29%), property (+6.08%), and industrial (+5.80%) sectors. In contrast, the resources sector saw more modest gains, rising by +0.67% for the week. The South African rand strengthened following the release of better-than-expected budget forecasts. By Friday’s close, the rand was trading at R18.25 against the U.S. Dollar, marking a weekly appreciation of +3.23%.

Chart of the Week:

Job growth has significantly decelerated from its rapid pace in 2021 and 2022, where monthly increases averaged 605,000 and nearly 400,000, respectively.

Investor anxiety has been heightened recently by the war in Ukraine and impending rate rises by the Federal Reserve. As such, we advise investors to maintain a calm stance during the crisis, diversify, and maintain exposure to long-term themes. Investors need to look beyond near-term news and gain exposure to industries benefiting from longer-term growth trends.

As always, we appreciate your support and value your trust in LNKD Investment Managers. 

Third-quarter economic growth in the US expanded faster than expected, highlighted by a better-than-expected gross domestic product report, which showed that the U.S. economy grew at an annualized pace of 4.9% in the third quarter, led by strong consumer spending. This preliminary growth reading marked a substantial increase from the second quarter’s 2.1% pace and was the most robust figure since the fourth quarter of 2021, surpassing economists’ average prediction of 4.3%.

On the inflation front, the core personal consumption expenditures (PCE) price index, a measure of inflation closely watched by the Federal Reserve, presented mixed signals. The year-over-year measure slightly decreased to 3.7% in September from the previous 3.8%. Despite remaining above the Fed’s 2% long-term inflation target, it is widely expected that the central bank will maintain rates steady at its upcoming October 31-November 1 policy meeting.

It was a busy week for quarterly earnings reports, with just under half of the constituents of the S&P 500 Index having reported for Q3 2023. Investor attention was notably focused on Amazon, Alphabet (Google’s parent company), Meta Platforms (owner of Facebook), and Microsoft, members of the mega-cap technology-focused group of stocks known as the Magnificent Seven. Amazon’s report, released after market close on Thursday, appeared to receive the most positive reaction, with shares of the company rallying strongly on Friday.

U.S. equities ended the week lower for a second straight week, as market sentiment was dented by mixed corporate earnings reports and concerns about higher interest rates. The Dow dropped by 2.1%, the S&P 500 by 2.5%, and the Nasdaq ended the week 2.6% lower.

On Wednesday, the Bank of Canada held rates steady at 5% while retaining a tightening bias,  the central bank acknowledged the lagged effects of monetary policy in holding back economic activity and moderating price pressures.

The European Central Bank (ECB) left short-term interest rates unchanged this week, raising expectations that rates may have peaked in the eurozone. After ten consecutive rate increases, the ECB kept its key deposit rate at 4.0%. ECB President Christine Lagarde highlighted the expectation of ongoing weakness in the eurozone economy for the remainder of the year.

In Europe, the pan-European STOXX 50 Index edged 0.26% lower due to uncertainties regarding interest rates, the economy, and conflicts in the Middle East. The UK’s FTSE 100 Index lost 1.50%.

Japanese equities were also down by 0.86% for the week, influenced by rising bond yields and geopolitical tensions. Japan’s core inflation rate accelerated to 2.7% in October, surpassing expectations, while the consumer price index rose to 3.3% from 2.8% in September.

In China, equity markets ended the week stronger with the benchmark Shanghai Composite Index advancing 1.16% driven by increased government economic stimulus.

Amid rising concerns about escalating military action in the Middle East, the price of gold broke through the $2,000 per ounce threshold as investors sought refuge in safe-haven assets.

Market Moves of the Week:

South African Finance Minister Enoch Godongwana issued a grave warning about the country’s deteriorating public finances in a keynote address this week. The upcoming Medium-Term Budget Policy Statement is anticipated to reveal measures aimed at curbing excessive spending, as the minister stressed the urgency of maintaining some current expenditure levels. Expressing deep concern over the mounting debt, Godongwana highlighted the alarming annual debt servicing costs of approximately R366 billion, surpassing the annual allocation to the Department of Police.

In a positive development, power utility Eskom reported significant progress in its battle against load shedding this week, with the recovery of unit one at the Kusile power station after a year of downtime. Last October, three units at the power plant went offline due to a mechanical fault. Electricity Minister Kgosientsho Ramokgopa indicated that four units at the Kusile power station would return to service by the end of this year. The recent suspension and reduction of load shedding have led to a noticeable improvement in the long-term outage trend data in the country.

The JSE All Share Index was lower on the week, following the global trend, with the benchmark index ending 1.06% lower for the week. The resource and financial sectors were the primary contributors to the local equity market’s weakness.

The rand firmed on Friday to end the week at R18.86 against the dollar, marking a 0.6% increase from the previous week’s closing rate. Investors are gearing up for the mid-term budget announcement on November 1.

In sports news, the Springboks retained the Webb Ellis Cup after a thrilling 12-11 win over the All Blacks in the final at the Stade de France in Paris on Saturday night.

Chart of the Week:

The Federal Reserve’s preferred measure of underlying inflation accelerated to a four-month high in September as consumer spending picked up. The core personal consumption expenditures price index, which strips out the volatile food and energy components, rose 0.3% in September, while inflation-adjusted consumer spending jumped 0.4% last month. Still, the Fed is expected to keep its finger on the pause button when it meets to mull interest rates next week.

Investor anxiety has been heightened recently by the war in Ukraine and impending rate rises by the Federal Reserve. As such, we advise investors to maintain a calm stance during the crisis, diversify, and maintain exposure to long-term themes. Investors need to look beyond near-term news and gain exposure to industries benefiting from longer-term growth trends.

As always, we appreciate your support and value your trust in LNKD Investment Managers. 

Heightened geopolitical tensions and a surge in long-term bond yields to their highest level in 16 years had a negative impact on investor sentiment this week. The S&P 500 Index experienced its most significant weekly decline in a month. Among major U.S stock indices, the Nasdaq Composite Index was hit the hardest and came close to entering bear market territory, finishing the week down by 19.91% from its early 2022 peak. In connection with these developments, growth stocks underperformed value stocks.

Federal Reserve Chair Jerome Powell indicated that the U.S. central bank is leaning towards keeping interest rates stable at its upcoming meeting, while remaining open to the possibility of raising rates in the future if the economy continues to show strength. This aligns with market expectations that the Fed will likely skip a rate increase for the second consecutive meeting scheduled for October 31 and November 1.

In the United States, the latest economic data looks positive. Retail sales for September exceeded expectations with a strong 0.7% increase, and core retail sales also rose by 0.6%. Industrial production and manufacturing production both outperformed expectations, with increases of 0.3% and 0.4% respectively in September. Business inventories for August also did better than expected.

However, in the housing market, housing starts saw a 7.0% increase, slightly below what was anticipated, and the growth rate for August was revised downward. Building permits, on the other hand, experienced a 4.4% decrease in September, surpassing expectations.

There were geopolitical tensions in the Middle East during President Joe Biden’s visit to Israel, following an explosion at a Gaza hospital. This incident led to the cancellation of a summit with leaders from Jordan, Egypt, and the Palestinian Authority, who blamed Israel for the explosion. Anti-Israel protests erupted in various cities in the region. The Middle East uncertainty pushed oil prices higher, Brent Crude Oil was up 1.56%, and closed the week at $92.32 bbl. 

In the United Kingdom, September’s inflation figures exceeded consensus expectations, with increases in services, core, and headline inflation. Core inflation rebounded to 0.41% on a monthly basis, up from last month’s 0.12%. The rise in services inflation, driven in part by volatile factors, raised concerns about inflation’s persistence. Despite this, the data, along with wage information and anticipated unemployment rates, suggest that the Bank of England (BoE) will likely maintain its current monetary policy at its November meeting.

Various European Central Bank (ECB) officials, including ECB President Christine Lagarde, Robert Holzmann from Austria, and Yannis Stournaras from Greece, have drawn attention to the inflationary risks arising from the increase in oil prices due to Middle East conflicts. Additionally, ECB Chief Economist Philip Lane mentioned in an interview with a Dutch newspaper that the central bank might need to wait until spring to have confidence that inflation is moving toward the 2% target. European government bond yields have generally risen as investors consider the possibility that interest rates might stay elevated for an extended period because of persistent inflation pressures.

In the third quarter, China’s economy showed resilience thanks to increased government support and rising consumer spending. Gross domestic product (GDP) grew by 4.9% year-on-year, surpassing expectations and improving from the previous quarter. In September, retail sales surged by 5.5%, the highest reading since May, thanks to government stimulus measures and stronger consumer spending.

However, the property market remained a drag on the overall performance. China’s housing market faced its steepest decline in nearly a year, raising concerns about the effectiveness of Beijing’s efforts to revive the sector. In September, new-home prices in 70 cities dropped by 0.3%, slightly sharper than the decline in August. This was the most significant month-on-month decline since October 2022. To support the economy, China injected a record amount of liquidity into its financial system through short-term monetary tools, signalling the government’s commitment to keeping funding costs low.

Concerns about China’s property market outweighed the stronger GDP figures, resulting in a sharp decline across Chinese equity markets. The Hang Seng Composite Index declined 3.60%, while the Shanghai Composite faired marginally better, but still declined 3.40% this week.

Meanwhile, Japan’s exports showed a year-on-year increase for the first time in three months, while imports continued to decline sharply. This resulted in a modest trade surplus of ¥62.4 billion. Importantly, export volume turned slightly positive for the first time since February 2022, indicating a potential bottoming out of Japan’s exports. Inflation in Japan fell below 3% for the first time in over a year, aligning with the Bank of Japan’s view that upward pressure on prices is peaking, which may impact expectations of near-term changes in negative interest rates. Japan’s Nikkei 225 closed the week lower, down 3.27%.

Risk off sentiment filtered through developed market equity markets this week, resulting in a sea of red. US stocks end lower, with the S&P 500 down 2.39%, the Dow Jones Industrial Average was the most resilient, but still closed the week down 1.61%. Growth stocks took the most pain, with the tech heavy Nasdaq Composite closing, down 3.16%. Euro Stoxx 50 ended the week lower, down 2.69%, the FTSE 100 also down this week, 2.60%.

Market Moves of the Week:

In South Africa, the latest economic data shows that headline inflation increased from 4.8% year-on-year in August to 5.4% year-on-year in September, which was in line with what experts had predicted. On the other hand, core inflation, which excludes volatile factors, decreased from 4.8% year-on-year to 4.5% year-on-year, surpassing the consensus forecast of 4.7%.The primary reason behind the rise in headline inflation was increased petrol prices, while food inflation remained relatively stable on an annual basis.

In other news, South African lawmakers have approved the nomination of Kholeka Gcaleka as the new Public Protector, a position previously held by Busiswe Mkhwebane. Mkhwebane was suspended a year ago and impeached last month.

The local equity market took direction from global peers, with the JSE ALSI ending the week down 3.73%. All sectors were weaker, with Resources leading the market lower, down 4.87%. Surprisingly the Rand was relatively flat this week against the US Dollar, although intra-week volatility was high. USD/ZAR closed the week at R18.98/$.

Chart of the Week:

Chinese investors made their largest sale of US bonds and stocks in four years, raising speculation that Chinese authorities might be taking this action to safeguard the weakening Yuan. Most of the $21.2 billion in sales included US Treasuries and equities, with Chinese funds also reducing their holdings of agency debt. This substantial divestment highlights the complexity of China’s economic and financial strategies and their potential effects on global markets. Source: US Department of Treasury, Bloomberg.

As always, we appreciate your support and value your trust in LNKD Investment Managers. 

In the past year, concerns about inflation, rising interest rates, and political instability have persisted, even as markets have shown improvement. However, recent tragic events in the Middle East have introduced new worries for investors, as they evaluate how military conflicts might impact financial markets. While acknowledging the human tragedy, the market’s primary focus has shifted to potential effects on oil prices, interest rates, and the strength of the dollar, as these factors have a more direct influence on market performance.

Major indexes concluded the week with mixed results as investors weighed up inflation data against dovish signals from Federal Reserve officials. Leading banks such as Citigroup, Wells Fargo, and JPMorgan Chase initiated the unofficial start of the third-quarter earnings reporting season on a positive note, benefiting from higher interest rates.

The release of minutes from the Fed’s September policy meeting on Wednesday suggested that policymakers agree that they need to maintain restrictive interest rates for some time, while being mindful of balancing the risk of overtightening with the goal of curbing inflation towards the 2% target. In September, CPI rose by 0.4% month-on-month, surpassing market expectations, signalling ongoing inflationary pressures. The Fed’s core CPI, which excludes food and energy costs, also increased by 0.3% in September.

In Europe, the ECB’s minutes revealed that the majority of policymakers voted to raise the key deposit rate to a record high of 4.0%. Meanwhile, the German government lowered its 2023 economic growth outlook from 0.4% growth to a 0.4% contraction due to higher energy costs and reduced demand from major markets like China.

UK retail sales growth slowed to 2.7% year-on-year in September, marking the second weakest month of the year, while GDP rose by 0.2% month-on-month in August, after contracting 0.6% in July.

In China, inflation remained subdued with CPI for September remaining unchanged from a year earlier. Meanwhile, producer prices fell by a higher-than-expected 2.5% compared to the previous year. At the same time, Chinese developer Country Garden Holdings faces its first-ever potential default and restructuring due to difficulties in meeting offshore payment obligations on U.S. dollar bonds, highlighting China’s property debt crisis.

Global equity markets concluded the week with mixed results. In the U.S., the Dow Jones (+0.79%) and S&P 500 (+0.45%) were positive whilst the Nasdaq (-0.18%) was mildly negative. Similarly, European and Asian markets, including the Euro Stoxx 50 (-0.20%), FTSE 100 (+1.40%), Nikkei 225 (+4.26%), Hang Seng (+1.65%) and Shanghai Composite Index (-0.70%) were mixed.

Market Moves of the Week:

South Africa’s latest census data reveals a substantial population growth, with the country’s population reaching 62 million in 2022, up from 51.8 million in 2011. The census also highlights the presence of over 2.4 million migrants, primarily from neighbouring countries like Zimbabwe, Mozambique, and Lesotho. Notably, this census is only the fourth since 1994 and the first in over a decade.

On the economic front, South Africa is expected to experience a slight growth upturn in the coming year, primarily due to improved energy supply – this according to a Reuters poll. GDP is anticipated to expand by 1.2% in 2024, exceeding previous estimates and surpassing 2023 projections. Additionally, a decline in inflation is expected to offer some relief to consumers, with inflation projected to decrease to 4.8% in 2024, down from the estimated 5.8% in 2023.

The JSE All-Share Index (+1.76%) was positive this week, driven higher by the resource (+8.42%) sector. Weaker performances came from industrial (-1.38%), and financial (-0.35%) sectors. By Friday close, the rand was trading at R18.98 to the U.S. Dollar.

Chart of the Week:

China’s consumer inflation rate unexpectedly flatlined in September while factory-gate deflation persisted, suggesting the economy’s path to growth is still fragile and in need of additional support. According to the National Bureau of Statistics, the consumer price index for the past month remained unchanged from the previous year, falling short of expectations for a slight increase, and approaching the deflationary level observed in July. Source: Bloomberg.

Investor anxiety has been heightened recently by the war in Ukraine and impending rate rises by the Federal Reserve. As such, we advise investors to maintain a calm stance during the crisis, diversify, and maintain exposure to long-term themes. Investors need to look beyond near-term news and gain exposure to industries benefiting from longer-term growth trends.

As always, we appreciate your support and value your trust in LNKD Investment Managers. 

In September, the U.S. economy saw the creation of 360,000 new jobs, and an extra 119,000 positions were included in the count through revisions. The print surged passed expectations of only 170,000 new jobs, re-igniting the bonds sell-off that has swept global markets over the past two weeks. The U.S. 10-year Treasury yields climbed by approximately 14 basis points, reaching 4.88%, marking their highest point since 2007, coinciding with a roughly 50% increase in the likelihood of a rate hike before the end of the year. The unemployment rate remained unchanged at 3.8%. Wage growth remained stagnant, rising 0.2% m/m and 4.2% y/y, while the workforce participation rate stayed steady at 62.8%. However, digging deeper, the data suggests that the labour market is driven more by increased worker supply than excessive demand, creating a more favourable inflation outlook.

In U.S. political news, after failing to secure Republican caucus support in the U.S. House of Representatives for a government funding bill that included spending cuts and increased border security, Speaker Kevin McCarthy allowed a bipartisan bill to proceed. It passed with a 335 to 91 vote, but 90 Republicans opposed it. On Monday, a motion to remove McCarthy as Speaker was filed and succeeded with a 216 to 210 vote on Tuesday. Eight Republican renegades joined with a united Democratic caucus to remove a speaker for the first time in history. The House is in recess until next week when a new Speaker will be elected.

Throughout most of 2023, the U.S. services sector remained strong, while manufacturing experienced a contraction. However, in September, this trend flipped, with the manufacturing index improving to 49 from 47.6, while the nonmanufacturing measure dropped to 53.6 from the previous month’s 54.5. Notably, the nonmanufacturing new orders index hit a low point, declining to 51.8, marking its lowest level in a year, down from 57.5.

Both official and private-sector data indicated a potential slowdown in the eurozone economy during the third quarter. The September reading of the final Composite Purchasing Managers’ Index (PMI) from S&P Global stood at 47.2, marking the fourth consecutive month of contraction. (A PMI reading below 50 signifies a decrease in business output.)

China’s manufacturing sector showed signs of recovery, marking its first expansion since March and suggesting a potential economic turnaround. The official manufacturing Purchasing Managers’ Index (PMI) exceeded expectations, rising to 50.2 in September from August’s 49.7. Additionally, the nonmanufacturing PMI surpassed forecasts, expanding to 51.7 compared to August’s 51.0.

Early Saturday morning, Palestinian group Hamas launched one of the biggest attacks on Israel in years with many killed, hostages taken, and fighting raging after a surprise assault that included gunmen entering Israeli towns after a barrage of rockets were fired from the Gaza Strip. Israeli Prime Minister Benjamin Netanyahu has declared a state of war.

During another week of trading dominated by large-cap growth stocks, especially in the mega-cap information technology and internet sectors, the major U.S. indexes closed with a mix of performances. The Nasdaq (+1.60%) and the S&P 500 (+0.48%) ended the week higher while the Dow Jones dipped -0.30%. Shares in Europe (Euro Stoxx 50) declined by -0.72%, while the FTSE 100 dropped by -1.49%. Financial markets in China were closed last week for the Mid-Autumn Festival and National Day holiday and will reopen on Monday, October 9. The Hong Kong Stock Exchange resumed trading on Tuesday, and the benchmark Hang Seng Index slipped by -1.80% for the shortened holiday week. Japan’s Nikkei 225 fell by -1.68%. Brent oil prices declined by -8.36% as demand fears outweighed supply cuts, while gold dropped by -0.84%.

Market Moves of the Week:

In South Africa (SA), Absa’s Purchasing Managers Index (PMI) declined to 45.4 in September from 49.7 in August, missing the consensus estimate of 49.5. The weak reading of the headline PMI was a result of exceptionally low demand and constrained production. Both external and domestic demand for South African manufactured goods came under pressure in the month. Factory production also suffered due to heightened and more severe power disruptions in September, leading to a sharp decline of 8.1 points in the business activity index, which fell to 41.9.

SA Reserve Bank Governor, Lesetja Kganyago, told a webinar on Thursday that inflation has eased, but stressed it was premature to declare victory in the battle to contain price pressures. Kganyago also mentioned that the bank would not step in to protect the local currency despite its current weakness. He stated that the bank was only concerned about the currency to the extent that it fed into inflation. On a related note, Finance Minister Enoch Godongwana is anticipated to caution SA about a widening budget shortfall and diminishing revenues when he delivers an assessment of SA’s fiscal status on November 1^st this year.

Public Enterprises Minister Pravin Gordhan said new Eskom and Transnet CEOs will be named shortly. Eskom has not had a permanent leader for over seven months and is being overseen by Interim Chief Executive Officer, Calib Cassim. Last week Friday, Transnet lost two senior leaders within the organisation. CEO Portia Derby resigned amid rail infrastructure challenges while Nonkululeko Dlamini, the CFO of Transnet, also handed in her resignation. “Finding the right people is a difficult challenge in the southern African context,” Gordhan said.

The JSE (-1.00%) dipped over the week with resource companies (-3.55%) continuing to struggle in the current market environment. The rand slumped against the dollar over the week as risk-off sentiment took hold. The local currency ended at R19.30/$ from last week’s 18.92/$ level.

Chart of the Week:

An index of the dollar’s strength is pushing toward its highest level since November. Risk aversion and rising U.S. yields meant the U.S. dollar was stronger against most currencies in recent weeks. Source: Bloomberg

Investor anxiety has been heightened recently by the war in Ukraine and impending rate rises by the Federal Reserve. As such, we advise investors to maintain a calm stance during the crisis, diversify, and maintain exposure to long-term themes. Investors need to look beyond near-term news and gain exposure to industries benefiting from longer-term growth trends.

As always, we appreciate your support and value your trust in LNKD Investment Managers. 

In August, the core Personal Consumption Expenditures (PCE) price index, excluding food and energy, saw a modest 0.1% increase, marking the smallest monthly rise since November 2020. Over 12 months, the annual increase for core PCE was 3.9%, down from an upwardly revised 4.3% in July. This PCE index is a favoured economic indicator by the Federal Reserve for assessing inflation. This smaller-than-anticipated rise in August indicates that the central bank’s efforts to combat rising prices are showing progress.

President Joe Biden signed the stopgap bill into law, preventing a government shutdown just hours before the critical midnight funding deadline. This legislation ensures the government remains operational for an additional 45 days, allowing the House and Senate ample time to finalise their funding measures. Crafted by House Speaker Kevin McCarthy, R-Calif., the 71-page short-term bill allocates funds for disaster relief but does not encompass new financial aid for Ukraine’s ongoing war with Russia. Since the outset of Russia’s full-scale war in Ukraine, the U.S. has allocated over $43 billion in security assistance for Kyiv. The House of Representatives voted 335-91 late on Saturday to prolong government funding for another 45 days. The House will resume its work on Monday.

Revised figures for the first quarter of the year show that the UK economy experienced a more rapid expansion than initially projected, as per the latest gross domestic product (GDP) data. The Office of National Statistics has revised the first-quarter growth rate to 0.3%, an increase from the prior estimate of 0.1%. Meanwhile, their assessment of second-quarter GDP growth remains unaltered at 0.2%.

Despite the surge in oil prices, inflation decreased across most European countries in September, resulting in the overall rate hitting its lowest point since before the onset of the war in Ukraine. According to the European Commission’s statistical branch, consumer prices in the 20 eurozone countries increased at an annual rate of 4.3 percent in September, a drop from August’s 5.2 percent. Over the past year, inflation in the eurozone has shown a consistent decline, following its peak at an annual rate of 10.6 percent the previous year. Core inflation, which excludes volatile categories such as food and energy and is considered a more reliable indicator of underlying price pressures, also experienced a recent easing, dropping to 4.5 percent in September from 5.3 percent in August.

In September, China’s factory activity saw its first expansion in six months. According to the National Bureau of Statistics, the Purchasing Managers’ Index (PMI), which is based on a survey of major manufacturers, increased from 49.7 to 50.2, surpassing the critical 50-point threshold that distinguishes between contraction and expansion. This reading exceeded the forecasted 50.0. The PMI data reinforces the signs of economic stabilization, following a preceding period of decline after the initial surge earlier in the year when China relaxed its stringent COVID-19 policies.

Global equity markets concluded the week on a downtrend. The S&P 500 Index sustained its fourth consecutive weekly pullback, driven by upward pressure on interest rates, which appeared to dampen investor sentiment. The S&P 500 Index posted a decline of -0.74%. Similarly, the Dow Jones Industrial Average experienced a downturn of -1.34% for the week. In contrast, the tech-heavy Nasdaq Composite posted a modest +0.06% gain. In Europe, both the Euro Stoxx 50 and the UK’s FTSE 100 recorded losses, sliding by -0.77% and -0.99%, respectively. The Asian markets mirrored this trend, with the Nikkei 225 (-1.68%), Hang Seng (-1.42%), and Shanghai Composite Index (-0.70%) all showing weakness.

Market Moves of the Week:

In the second quarter of 2023, South Africa witnessed a substantial increase in foreign direct investment inflows, reaching R53.8 billion ($2.8 billion), as revealed in data from the central bank. This surge marked a significant rise from the 0.5 billion rand recorded in the preceding quarter. The Quarterly Bulletin from the South African Reserve Bank (SARB) attributed this growth to a non-resident firm’s acquisition of a domestic beverage company.

Moreover, the Quarterly Bulletin disclosed that during the first quarter of fiscal year 2023/24, the national government reported a cash book deficit of R47.1 billion. This represented a notable contrast to the R11.5 billion cash book surplus reported during the same period in the previous fiscal year. The central bank indicated that this deficit was primarily covered by the issuance of long-term government bonds in the domestic financial markets.

Additionally, the Quarterly Bulletin noted a decrease in portfolio investment outflows in the second quarter, which dropped to R4.6 billion from R32.0 billion in the preceding quarter.

During the week, the JSE All-Share Index recorded a decline of -1.38%, led by losses in the financial sector at -1.75%, followed closely by industrials at -1.60%, and property at -1.50%. The resource sector also contributed to the week’s losses, ending with a decline of -1.05%. Additionally, the South African rand depreciated during the week, closing at R18.84 against the US dollar.

Chart of the Week:

In August, US consumers’ inflation expectations remained largely stable. The decrease in underlying price pressures has increased optimism that the US central bank may not implement an interest rate hike in November.

Investor anxiety has been heightened recently by the war in Ukraine and impending rate rises by the Federal Reserve. As such, we advise investors to maintain a calm stance during the crisis, diversify, and maintain exposure to long-term themes. Investors need to look beyond near-term news and gain exposure to industries benefiting from longer-term growth trends. As always, we appreciate your support and value your trust in LNKD Investment Managers. 

The Federal Reserve (Fed) paused its extended campaign against inflation this week, holding its benchmark interest rate steady and giving borrowers a breather after 11 hikes since March 2022.

As expected, the Fed left its short-term lending benchmark at a target range of 5.25% to 5.50%, the level set at the previous meeting in July. Their updated Summary of Economic Predictions still indicated the likelihood of one more rate increase in 2023.

On the economic front, Fed officials revised their 2023 growth forecast upward to 2.1%, a significant increase from the earlier projection of 1%. They also adjusted their view on peak unemployment, now expecting it to reach 4.1% instead of the previously forecasted 4.5%.

The official Fed statement surprised markets with a more hawkish outlook for interest rates in 2024. In addition, the central bank signaled that a US recession is less likely, while Chairman Jerome Powell reiterated that interest rates are likely to remain higher for longer until inflation starts rapidly moving closer to its 2% target.

The three major U.S. equity benchmarks declined for the week as investors reacted to hawkish forecasts from the Fed’s latest meeting and rising U.S. Treasury yields. The S&P 500 and the technology-heavy Nasdaq Composite ended 2.9% and 3.6% lower this week, respectively, while the blue-chip Dow slid 1.9% on the week.

The Paris-based OECD adjusted its global growth forecast for 2023 upward to 3%, citing the resilience of the U.S. economy, compared to its previous forecast of 2.7% in June. However, it lowered its 2024 projection to 2.7% from 2.9% due to expectations of cooler labor markets, persistent inflation, and the effects of tighter monetary policy slowing global growth.

The outlook points to several downside risks, including the possibility of inflation persisting longer than expected, potential disruptions in energy and food markets, and a slowdown in China that could dampen growth and business confidence in trading partners worldwide.

In Europe, the STOXX Europe 50 Index ended the week 2% lower due to indications from central banks that higher interest rates would persist. Additionally, concerns arose from higher oil prices and sluggish business activity data, clouding the region’s economic outlook.

In the UK, the Bank of England’s Monetary Policy Committee voted 5-4 to keep the key interest rate at 5.25%, marking the first pause since December 2021. This decision was made in response to slowing economic growth. BoE Governor Andrew Bailey emphasized that borrowing costs could rise again if signs of persistent inflationary pressures emerged. This pause followed a report showing a slight decrease in the UK’s annual inflation rate from 6.8% in July to 6.7% in August. The UK’s FTSE 100 was little changed in local currency terms, supported by a depreciation of the pound versus the U.S. dollar.

In Asia, Japan’s stock markets were also down on the week, with the Nikkei Index ending 3.4% weaker. Sentiment was dampened by the Fed’s signaling that it planned to keep interest rates higher for longer. In contrast, the Bank of Japan (BoJ) matched expectations of no change to its monetary policy at its September meeting, as widely anticipated, the BoJ kept its short-term interest rate at -0.1% and that of 10-year Japanese government bond (JGB) yields at around zero percent.

Chinese equities bucked the trend this week, with the Shanghai Composite Index gaining 0.47% as investors became more optimistic about China’s economic prospects.

Market Moves of the Week:

The South African economy is currently facing significant challenges, with consumers feeling the strain from high inflation and interest rates, a weakening local and global economic environment, increasing costs of fuel, water, and electricity, a slight uptick in the Consumer Price Index (CPI), and the ongoing global geopolitical crisis.

In its recent meeting, the South African Reserve Bank’s Monetary Policy Committee (MPC) made the decision to maintain the repo rate at 8.25% (with the prime lending rate at 11.75%) for the second time. This move followed a small increase in the Consumer Price Index (CPI) to 4.8% in August, the first uptick in five months. Among the committee members, three voted to keep the rate unchanged, while two members favored a 25 basis point increase.

Governor Lesetja Kganyago noted that although inflation had moderated somewhat throughout the year, the prospect of further deceleration is less certain. Growth forecasts remain subdued, and the long-term economic outlook is clouded by persistent risks, including the adverse effects of climate change and ongoing geopolitical tensions. The decision was largely in line with economists’ predictions but the close vote between a hold and another rate hike reflects the uncertainty surrounding the local economy.

On Monday, Naspers and Prosus informed shareholders that CEO Bob van Dijk would be stepping down with immediate effect from his position as chief executive as well as his position on the boards of both companies. According to the announcement Van Dijk has agreed to assist with the transition on a consultancy basis until 30 September 2024. Erwin Tu, Prosus’ group chief investment officer has been named interim CEO. Naspers, a global internet group, currently boasts a market capitalization of more than R560 billion, making it Africa’s largest company in terms of valuation.

On the Johannesburg Stock Exchange, the benchmark All Share Index ended the week 1.6% lower, primarily weighed down by declines in the resource (-3.17%) and industrial (-2.51%) sectors. In contrast, the financial sector ended the week 1.14% stronger.

The rand was firmer on Friday, trading at R18,76/$ by Fridays close, recovering from earlier levels above R19 to the USD earlier in the week. However, some analysts cautioned that the potential for further appreciation of the rand may be limited, particularly leading up to the mid-term budget announcement on November 1, due to concerns regarding the state of South African public finances.

Chart of the Week:

Ahead of the Fed interest rate announcement, Bloomberg’s World Interest Rate Probabilities function was predicting a 4.57% rate at the end of 2024, which subsequently rose to 4.76%. As per the chart above the shift in the course for the fed funds rate implicitly predicted by futures over just the last three months has been significant.

Investor anxiety has been heightened recently by the war in Ukraine and impending rate rises by the Federal Reserve. As such, we advise investors to maintain a calm stance during the crisis, diversify, and maintain exposure to long-term themes. Investors need to look beyond near-term news and gain exposure to industries benefiting from longer-term growth trends.

As always, we appreciate your support and value your trust in LNKD Investment Managers.