Weekly Market Forecast 20 – 24 June 2022

  • Local

The South African Statistics Service (StatsSA) has released the latest data on retail sales, summarised below:

  • Retail sales increased by 3.4% year-on-year in April 2022, with the largest positive annual growth rates for retailers recorded in household furniture, household appliances and equipment
  • Motor vehicle retail sales were up 11.5% year-over-year in April 2022, with the largest annual growth rates for motor fuel and new motor vehicle sales.
  • The new week is relatively quiet on the data front, although markets will take note of Wednesday’s Consumer Price Index (CPI) release for an update on local inflation and an indication of future Reserve Bank monetary policy.

 

  • International

A sharp sell-off in global equity markets reflected concerns about economic growth in the face of high inflation and accelerating monetary tightening, particularly in the United States.

The Federal Reserve raised borrowing rates by 75 basis points (0.75%) at the conclusion of its monetary policy meeting last week. The central bank also left the door open for another 75 basis point hike at its next meeting. This led to a sell-off in equity markets, a strengthening of the U.S. dollar, and a rise in U.S. Treasury bond yields.

In a surprise move, the Swiss National Bank (SNB) raised its key interest rate by 50 basis points to -0.25%, the first major increase since 2007.

The Bank of England (BOE) considered a 50 basis point hike, but opted to only raise UK lending rates by 0.25%.

In the new week, markets will focus on European data on purchasing managers’ indexes for the service sector and manufacturing, as well as the hearing of Fed Chairman Jerome Powell on Thursday.

 

  • The Rand

The Rand sold off in a week of global risk aversion. Our domestic currency found little support from key export commodity prices, which were also mostly lower this week.

However, we saw renewed strength at ZAR, which lifted the domestic currency off its weekly lows against the greenback. However, this move did not follow any new news, but can be attributed to a partial recovery from oversold territory in the general market.

 

  • Commodities

As the dollar index hit new highs this week, industrial metals prices in particular came under pressure. However, some risk appetite supported minor gains in precious metals.

Base metals were led by a decline in iron ore following news that China plans to ban new industrial projects in certain regional zones. The ban, aimed at controlling emissions, will affect new steel and coke plant projects. Iron remains an important ingredient in steel production.

The International Energy Agency (IEA) has released its oil market report for June 2022.

Some of the key findings from the report are as follows.

  • Slowing demand growth and an increase in oil supply by the end of the year should contribute to a balanced market
  • Weaker economic outlook and higher prices dampen demand expectations this year
  • The main risks to oil prices stem from the implementation of tighter sanctions against Russia, a recovery in demand in China after the shutdown, continued sharp production declines in Libya, and a slowdown in additional production capacity OPEC.
  • Oil demand is expected to increase to 101.6 million barrels per day (bpd) in 2023, above pre-pandemic levels.

The recovery in oil demand in 2023 is expected to be driven by resurgent growth in China, offsetting weaker demand from OECD countries.

 

  • Company

Naspers Ltd: projected a loss per share of between $4.46 and $3.78 in its FY22 trading statement, compared with a profit of $9.70 a year earlier.

Standard Bank Group Ltd: in its voluntary trading update for the six-month period ending June 30, 2022, expects HEPS and EPS to be more than 20% higher than the same period last year.

Telkom SA SOC Ltd: FY2022 results show 7.4% year-on-year increase in diluted EPS.