Week in Review: Global equities grind higher

U.S. stocks posted solid gains, closing near record highs. Earnings continue to drive market action, with third-quarter results so far coming in better than feared. Technology, communications services and financial stocks powered the rally. Of the roughly 40% of the companies in the S&P 500 that have reported so far, 80% of them had results that topped Wall Street’s earnings forecasts, while 64% beat revenue estimates, according to FactSet. Beyond earnings, the Federal Reserve issues its latest interest rate policy statement next Wednesday.

Reports that the U.S. and China are close to finalizing sections of the trade deal also boosted investor sentiment. The U.S.-China trade conflict, which has led both sides to impose billions in tariffs on each other’s goods, has stoked worries that the dispute could tip the global economy into a recession.

A narrow majority of MPs voted for the prime minister’s negotiated deal with Brussels to leave the EU, but then minutes later voted against his proposed schedule to pass the legislation into law within three days. This means that the Oct. 31 deadline set by Brussels will not be met. EU ambassadors have agreed to delay Brexit but will not make a decision on a new deadline date until next week. The chances that Britain exits at some point in the next few months in an orderly fashion look, if anything, slightly stronger than before.

In election news, Canadian Prime Minister Justin Trudeau's Liberal party won a second term in national elections, narrowly defeating Conservatives who captured the popular vote.

Voters go the polls in Argentina on Sunday, with incumbent President Mauricio Macri, a right-wing businessman, facing centre-left challenger Alberto Fernández. Argentina's elections are all about the economy. If Fernández wins the elections, he will start having to negotiate with its creditors including the International Monetary Fund (“IMF”). Last year Macri was forced to ask the IMF for a record bailout of $56 billion.

For the week, global equities generally posted gains. In the U.S., the S&P 500 (+1.22%), Nasdaq (+1.90%) and the Dow Jones Index’s (0.70%) ended the week in positive territory. In Europe and Asia, the Euro Stoxx 50 (+1.26%), the FTSE (+2.43%), the Shanghai and Nikkei 225 (+1.37%) indices all ended the week in the green.

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Market Moves of the Week

In SA, Finance minister Tito Mboweni is set to present his medium-term budget policy statement (“MTBPS”) on Wednesday. The MTBPS outlines the government’s budgetary plans for the next three years. Analysts say Mboweni has a difficult task ahead of him as weakening GDP growth, coupled with increased government spending and a higher national debt burden, leave him little space for comfort.

Friday sees ratings agency Moody’s Investors Service release a report on its latest review of SA’s sovereign credit rating. Most market commentators believe a downgrade to sub-investment grade by Moodys is unlikely but given the elevated government debt levels and financial pressure from Eskom a ratings review from the current stable outlook could be revised to negative.

Should Moodys downgrade South Africa to junk status, the country would no longer be eligible for inclusion in debt gauges such as Citigroup Inc’s World Government Bond Index (WGBI).

The JSE all share fell 0.61% on Friday, ending the week down (-1.04%). Industrials led the losses, down (-3.25%) over the week while resources ended the week up (1.46%).

Weekly
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Chart of the Week

New Zealand had the highest score and it is notable as having the shortest time to start a business at just 0.5 days along with the lowest number of procedures to start one. The United States came sixth and despite fears about the economic impact of Brexit, the United Kingdom came eight. South Africa’s ranking in the latest World Bank’s Ease of Doing Business 2020 report fell two places from 82nd last year to 84th this year. South Africa came fifth among African countries. Mauritius was the highest-ranking sub-Saharan African economy overall as it ranked number 13.

Ease of business

Source: World Bank | Statista Charts (Based on 12 regulations that enhance/constrain business activity).

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For assistance or more information, contact your Carrick Wealth Specialist directly or alternatively contact us at

wealthmanagement@carrick-wealth.com.

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