EB Market Update – October 2018

Global – Stretched IT valuations

Persistent rhetoric from the Trump administration regarding US/China trade relations, coupled with concerns over the durability of the economic cycle, resulted in a sharp sell-off of US equities. The softer earnings from tech giants Alphabet and Amazon seemed to initially confirm this, but subsequent earnings numbers suggest that strong corporate earnings momentum remains intact.

In line with other global equity markets, Eurozone equities experienced a significant sell-off with the MSCI EMU Index down -6.5%. Economic data continued to point to a slowdown in the region, with Q3 GDP down to 0.2% from Q2’s 0.4%. Furthermore, PMI for October came in at 52.7 from September’s 54.1 and was at an almost two year low. The European Central Bank maintained its monetary policy with the target for a cessation of asset purchases still the aim for year end.

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Domestic: Near the bottom?

In spite of government efforts to prop up market sentiment, SA equities traded in line with global markets with the FTSE/JSE All Share declining -5.76% as resource and industrial stocks came under selling pressure. Financial counters did not escape the sell-off, declining -3.19%. Dual-listed industrials, which ordinarily support returns, were a major negative contributor to industrial counters with the FTSE/JSE Industrial Index losing -8.0% of its value. The FTSE/JSE Resources Index declined -3.96%.

The headline CPI annual inflation rate in September 2018 was 4.9%. This rate was unchanged from August 2018. On average, prices increased by 0.5% between August 2018 and September 2018.

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