Stanlib Morning Market Commentary Wednesday 18th June 2014 Developed markets continue for now to maintain a quiet steadiness as the northern hemisphere summer progresses and the May to September period defies its normal downturn, despite millions of investors hoping for and expecting a correction. Markets have “minds” of their own. They will not be dictated to by mere mortals like us! Yesterday we had US inflation surprising on the up, with 2.1% year-on-year, the highest in 2 years, mostly because of food (highest in 3 years) and fuel. This pushed the 10-year yield up to 2.65% from 2.6%. The Fed typically targets 2% inflation, so we’re right there; but fears of deflation are receding. Meanwhile, in the UK, despite the strong economy and booming house prices, inflation surprised on the down at 1.5% year-on-year, the lowest in 4 years, apparently thanks to a price-war among supermarkets (food prices -0.6% year-on-year…wouldn’t we like that!!). The stronger pound helped too. UK house prices surged in April +9.9% (England +10.4%), at a new record and 6.5% above the previous peak in January 2008. The rise is mostly concentrated in London (+18.7%!!!! WOW) and south-east England +8.9%. But the rest did +6.3% (in a v strong currency nogal). The US S&P 500 Index rose by 0.2% and the Nasdaq by 0.4%, Europe +0.4% and the FTSE 100 by +0.2%. So all up a tad. This morning the Nikkei is +0.9%, Hong Kong is flat (Tencent +0.2%) and Aussie -0.3% with Billiton +0.8%. The JSE All Share Index rose yet again yesterday by 0.3% to 50,911, a new record high. The index is now up 10.1% YTD (3.6% in one month and 26.3% in the past twelve months). Take that folks. The bull is alive and well and trends frequently go on MUCH further than expected; and our much-maligned market appears to be outperforming most, despite all the massive negativity out there in most (not all: we’ve seen some excellent positivity from Alec Hogg of late) the media. The dollar is flat this morning at $1.354 to the euro (identical to Friday morning) and versus the pound too at $1.697 (also similar). The rand is down at 10.84 today to the dollar (from 10.74), at a 4-month low versus the strong pound at 18.38 from 18.27, 14.68 to the euro from 14.60 and 10.12 versus the Aussie, a new low I suspect. The rand has fallen along with almost all emerging market currencies so far this week. Interestingly, after the downgrade, foreign investors still bought a net R626m of our bonds yesterday and R599m of our equities. But our R186 13-year SA government bond yield has risen to 8.48%, ahead of our current account deficit number today (shows our net trade in goods and service with the rest of the world) - expected to be somewhat worse/negative - and our inflation CPI rate, also expected to be worse around 6.5%, the highest in a while (both at 10am today). The platinum producers are assessing the further issues of AMCU with regard to the offer made last week. Meanwhile, well-known local company Alexander Forbes is deciding whether to pursue a sale of the company or to have an initial public offering of its shares (it went private a few years ago). Steven Cranston of the Financial Mail speculated recently that our holding company Liberty may be interested in buying Alexander Forbes. Paul Hansen Director: Retail Investing Stanlib Wealth Management stanlib
Posted on: Wed, 18 Jun 2014 14:04:25 +0000