Global Markets

After a fairly bullish start to the week, jobless and housing stats sent the Dow Jones Industrials into a slight collapse on Thursday’s trade. Concerns about the aftermath of the Freddie and Fanny fiasco are still weighing on the minds of many investors. A stronger USD came about from Paulson, talking of a bill due to be passed by congress, regarding the aforementioned issue that looks to strengthen confidence. On the back of that announcement, the USD rose 0.2%, breaking through a significant technical barrier of 1.5900 to the EURO.

The passing of the bill reaffirms that the US economy is in serious trouble and confirms that the collapse of the two institutions (which own or guarantee approximately half of the $12 trillion in US home loans) is frighteningly possible. Alas, more hawkish Fed rhetoric vis-à-vis rising inflation as well as better than expected losses, particularly from U.S. financial stocks, buoyed the dollar for the rest of the week.

Commodities, which again saw oil providing the main focus point for analysts, continued its decline for a second week. It was another fairly quiet week in terms of geopolitical events. A stronger USD and for the 4th week in a row, we saw stronger than expected US refinery figures out of the States. Gold came off this week, mainly on the back of a stronger USD and a weaker oil price, and eased inflation concerns. A lot of traders have cut their long oil, short dollar positions, which have put downward pressure on the world’s alternate currency.

Platinum is down around 5% and copper down around 2.5% on the week. These metals are both indicative of the economy as a whole and from a macro point of view, the global economy is looking fairly weak.

Local Markets

The All Share came down this week, losing almost 5%, mainly as a result of the resource sector. Both platinum and gold stocks have declined on the back of lower commodity prices, including oil. I believe that we could see more downside over the long term but expect a short term bounce in p latinum stocks, as they are reaching important technical support levels. We saw AngloGold down 10.3%, Impala Plats down 8.2%, Goldfields down 15.7% and AngloPlats down 6.5%.

Banks showed good gains once again and we anxiously await results from our local banks for clearer direction. During the week we saw Standard Bank up 12% from its lows and First Rand and RMB up 8% from their respective lows.  

MTN abandoned its second potential merger in 3 months, but is still in line with its strategy of growth by acquiring other operators, especially in emerging markets. One possibility is a merger with America Movil, with networks in 17 states within the US as well as central and Southern America.

Tiger Brands also announced details of its plans to list Adcock Ingram on the JSE next month. An agreement was signed, giving Swiss group Baxter Healthcare the option to buy a stake in its soon to be unbundled health-care subsidiary Adcock Ingram, a deal potentially worth R4.8-bn.