With the Top 40 Index trading at all time highs of (40,913.80), we hold firm on our recommendation from last week that an attractive investment would be the Capital Accumulator 60 month investment which offers a potential 46% return Alternatively, the 5year PII with 100% capital protection is the ideal investment vehicle for the bullish investor.
Last month the US central bank said it would stick with its monthly $85bn bond purchases, citing a drawn-out budget battle in Washington and the need for stronger economic data, leading many to believe its tapering of the programme would not begin until next year. However, recent strong data on US factory output and jobless claims have brought back the possibility that it may start to scale back this year. The Fed, which meets next on December 17-18, has said the timing of its tapering depends on the health of labour and housing markets. The Fed’s bond-buying has burnished gold’s appeal as a hedge against inflation, boosting prices over the past few years, but signs that the programme could be coming to an end have hurt prices this year.
With respect to local data, this week sees the release of SARB gross gold and foreign exchange reserves numbers for October, and mining and manufacturing production numbers for September, all on Thursday. We do not expect much action in respect of reserves numbers – nor does consensus. Consensus pins growth of mining output accelerating to 6.8% y/y from 2.1% in August. This is likely premised on base effects of a 5.4% seasonally adjusted m/m contraction in September last year. Risks here perhaps lie to the higher side of consensus opinion. In respect of manufacturing, the consensus forecast is for a flat reading (0.0%) versus an August score of 0.2%. Motor industry strikes, which stretched from late August till early October, will hit the numbers. However, the base is soft, which suggests that the consensus forecast is perhaps not unreasonable. From a currency market and interest rate perspective, mining and manufacturing numbers should be interpreted via what they imply for both domestic growth performance and the balance of payments.
A strong non-manufacturing PMI reading for China, out earlier this morning, has reinforced optimism that the economic momentum seen in Q3:13 might be carried over into Q4:13.
On the US data front, this week is particularly heavy — culminating in the release of non-farm payrolls on Friday. Last week’s ADP employment numbers did not bode well for October non-farm payrolls data. A disappointing outcome might serve to temper some of the dollar enthusiasm that ensued after last Friday’s ISM manufacturing reading, to the extent that it influences the market’s view of when the Fed might start to reduce its bond purchases.
We also have the ECB and BoE policy meetings this week (both on Thursday). Neither are expected to alter policy.
*Article courtesy of Standard Bank CIB