In our view the highest probability trade would be the medium to longer term PII Resi. There is a clear demand for large cap resource stocks right now, most likely because they’ve been so beaten down for so long. The general market remains vulnerable right now, but the overall strategy is to be buying on corrections. In current market conditions, the 5 year Capital Accumulator is an attractive investment with a 47% return if the market remains flat or higher, the 60 PII Resi, offers an attractive investment strategy, where capital growth can be doubled.
On Friday weak US jobs data softened QE tapering expectations, Putin’s unwavering support for the Syrian regime has the market concerned, Chinese export data was better than expected, close to consensus, with the CPI falling to 2.6% from 2.7%. Non-food fell to 1.6% from 1.7%, its lowest since August last year. Food prices rose an annual 5% from 4.7% last time. PPI prices fell an annual 1.7%, compared to –2.3% in July. Over the weekend trade data showed a surplus of USD28.6bn after USD17.8bn in July. Exports rose more than expected, at a 7.2% annual rate, which is up from 5.1% in July, while imports were slower, rising 7% after 10.9% the prior month.
Japan’s GDP data was good. The market getting further spooked about the situation in Syria, we are well poised for further USD weakness against the rand. This should last at least near-term, until the next Fed meeting a week away on Wednesday. Moreover, although I agree with the market that the Fed wants to taper – they are worried about taking QE to a place they can’t return from.
UK data on staff placings showed that permanent placings in August were just off the 2-year-plus highs seen in July. The index here fell to 61.3 from 63.3. But temporary placings continue to rise with the index figure here of 62.9—after 61.5—the strongest since 1998. In other news, MPC member Fisher, who seems to have been one of the leading proponents of QE, said that more QE might not be necessary if forward guidance does its job. He also said that the Bank does not want to get into a fight with the market over forward guidance. He seemed to suggest that the market would not behave inappropriately and hence the need to pull the markets into line would not be a big issue for the Bank.
There’s no significant data releases on the agenda today but, in reality, they would not have made any difference anyway as the market is likely to be wrapped up in the speculation surrounding the Syrian vote in Congress. This should take place in both houses this week. Syria and Fed tapering will remain the dominant issues for a while yet. On Thursday look out for U.S Initial Jobless claims figures and on Friday we have Retail Sales and PII being released. Data released out the UK on Wednesday, Jobless claims figures and ILO unemployment figures. On the local front key data to look out for tomorrow, Current Account GDP and Current Account balances, on Wednesday we have Manufacturing and Thursday Mining and Gold Production.