Week in Review: US earnings off to a strong start

World markets ended the week on a high note, with signs of a stabilizing global economy. The IMF cut its 2019 global growth forecast to 3.3% from 3.5% but noted that it expects growth to firm up in the second half of the year (see our chart of the week).

In the U.S. JPMorgan Chase & Co. kicked off bank earnings on a positive note and Chevron’s latest deal sparked a rally among energy producers. The Dow received a big boost from Disney, which surged to a record after it announced a much-awaited streaming service.

Strong US corporate earnings should remain supportive of equity markets, but the pace of growth is likely to slow this year. Overall earnings for 2019 are forecast to grow by low- to mid-single digits, helped by positive GDP and healthy revenue growth.

In the early hours of Thursday morning, the European Council granted the United Kingdom a second, longer, extension of Article 50. The extension means Britain now has until 31 October to advance through Parliament the agreement negotiated with the European Union to withdraw from it. The extension reduces the risk of a chaotic no-deal split but increases the likelihood of a further six months of political uncertainty in both the UK and Europe.

There was further progress on the trade front with US Treasury secretary Steven Mnuchin saying this week that the United States and China have reached agreement on the enforcement mechanism of the trade agreement the two sides have been negotiating for months.

Uber Technologies Inc. has filed IPO documents detailing: $11 billion in 2018 net revenue, $3 billion in operating loss and a network of 3.9 million drivers worldwide. The company could sell $10 billion in stock valuing it at $100 billion.

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Market Moves of the Week

 

Locally the rand ended the week on a firmer footing as the U.S. dollar weakened, while signs of economic stabilisation in China boosted demand for riskier assets after Chinese data showed exports rebounded last month, helping offset weaker imports.

It was a good week for SA Inc equities with a stronger rand helping to spur the banking and retail sectors. The Johannesburg All-Share index gained 0.38 percent to 58,405 points on Friday, ending the week over a percent stronger.

In fixed income, the yield on the benchmark government bond due in 2026 fell 0.5 basis points to 8.485 percent.

Weekly
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Chart of the Week

 

Global economic growth is expected to recover in the second half of this year, before plateauing at 3.6 percent from next year, according to the Washington-based fund. Encouraging developments have boosted optimism about the world economy in recent weeks, including the decision of the Federal Reserve to put interest-rate hikes on hold and encouraging data from China’s manufacturing sector and the U.S. job market.

IMF Growth

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