Weekly Market Forecast 11 – 15 April 2022

  • Local

Moody’s upgraded South Africa’s outlook to negative from stable in local and foreign currency terms, but kept the country’s credit rating two notches below investment grade (Ba2). The outlook upgrade follows the local government’s efforts to control debt and reduce budget deficits. Higher commodity prices are also expected to support mining revenues and thus tax revenues, further supporting the improved outlook for the rating. Risks Moody’s still sees in the domestic economy include financially dependent state-owned enterprises (SOEs), public sector wage costs, and increasing welfare and dependency needs.

 

  • International

Federal Reserve Board member Brainard gave a hawkish tone to U.S. monetary policy after suggesting a rapid reduction in the U.S. balance sheet, which had been significantly expanded by recent stimulus measures.

This was backed up by the FOMC (Federal Open Market Committee) meeting minutes, which showed that the Fed is setting the stage for possibly raising interest rates more (0.5% instead of 0.25%) later this year, as well as reducing the balance sheet to the tune of $95 billion per month.

 

  • The Rand

The rand has held its own against a number of developed market currencies, but has been unable to stem the tide of dollar strength as the U.S. Federal Reserve has taken a tighter stance.

Nevertheless, the domestic currency has shown some resilience in the global market, perhaps helped by the news that ratings agency Moody’s raised its outlook for South Africa’s creditworthiness at home and abroad from negative to stable.

 

  • Commodities

Oil prices continued to fall. The drop in the price of the commodity followed news that the U.S. and its allies are preparing to put their reserves on the market to try to ease global supply shortages. The U.S. has announced plans to release about 180 million barrels of oil from reserves over the next six months. The International Energy Agency (IEA) has supported the U.S. by announcing it will release another 60 million barrels to the market. Previously, the IEA had already put about 60 million barrels on the market.

  • Company

Pick n Pay Stores Ltd: in its trading statement for fiscal 2002, the company indicated an increase in diluted earnings per share to between 237.10c and 257.19c from 200.93c a year earlier.

PSG Konsult Limited: in its FY22 trading statement expects HEPS excluding amortisation to increase between 69.20c and 70.20c from 52.20c in the previous year.