Global Markets

Sentiment across the global markets was again dampened this week by the persistent rise in the price of black gold. Oil rose once again on the back of a weaker dollar to a record $146.30 per barrel. Supply concerns emerged from Iran to further push the price higher and comments from the OPEC meeting in Spain indicated supply and demand were in balance.

Last week, the ECB warned it was in a situation of "heightened alertness" on inflation, seemingly preparing markets for a 25 basis points increase. It finally announced the hike during early afternoon trading on Thursday. The ECB has become the first G7 central bank to raise interest rates since the credit crisis erupted in August last year. US stocks were battered this week as the Dow Jones Industrial Average experienced a 20% drop since its all time highs in October. A drop of 20% is viewed by some as an entrance into bear market territory.

Raw material producers dragged Standard & Poor’s 500 Index to its deepest drop since January this year. General Motors Corporation traded at its lowest price since 1954 after Merrill Lynch & Co said that the US automaker may face bankruptcy. US payrolls fell by 62,000 and the unemployment rate stayed at 5.5% after its highest level in 20 years. The dollar kept most of its gains against the euro after the data was released.

SA Markets

The ALSI was weighed down heavily this week, largely sparked by a pullback in the resource sector. Inflation and growth woes continue to add to the already diminished market sentiment.

Top performers such as Exxaro and ArcelorMittal each fell about 14%, the former on the back of a $20 drop in coal prices. Implats was the worst performer in the Top40 falling close to 17%.

Thursday saw a massive drop off, close to 1000 points with the ALSI down almost 7.5% for the week. Aspen Pharmacare Holdings, who agreed to buy four medicines from GlaxoSmithKline Plc, this week gained 14.5%, the most of any stock trading on the ALSI. Citigroup Incorporated yesterday raised its share price estimate on Aspen to R56 from R45.

Local consumer confidence, house prices, passenger vehicle sales (which decreased by 22% in June) and the prospects of higher interest rates all work together to dampen our outlook. A stronger rand had helped soften the pain and was bid at 7.72 to the US dollar, while gold was quoted at US$929.55 a troy ounce.