The year is looking bright from a market perspective. Although UK markets started February more tentatively than January, investor sentiment picked up following news that trade tariff deadlines had been postponed and that a second US government shutdown wouldn’t follow the first. Even the stalemate at the US-North Korea summit didn’t take the wind out of investors’ sails for long.
European markets generally followed the positive global trend, with Spain in the lead. But news that Italy entered a recession in the final quarter of 2018 gave the eurozone a knock. The European Commission has since halved Italy’s growth forecast for the coming year. Meanwhile, Germany’s manufacturing data from end-2018 compounded fears that the eurozone’s cash cow is heading for a recession.
In the UK, lower inflation figures for January eased concerns that pound weakness during Brexit negotiations had caused inflation to spike. Royal Bank of Scotland announced its profits had doubled in 2018 from 2017, but investors remained cautious. Consumers turned to retail therapy to soothe their anxiety, with UK sales showing monthly increases. The pound then strengthened on the back of rumours that Prime Minister Theresa May might postpone Brexit.
Chinese stock markets started February with a five-day holiday as part of the Chinese New Year. In Japan, the Nikkei was hit by Sony’s 8% fall. Already flustered investors sold off after US President Donald Trump suggested that US-China talks were unlikely to continue before another round of trade tariffs was implemented in March – but their fears evaporated as the tariffs were delayed, causing Chinese markets to jump more than 5%. India and Pakistan then came to the fore, the markets sighing in response to reports of missiles fired on aircraft. As the two countries continued their dispute over the Kashmir region, Pakistan’s KSE 100 dropped over 3%.
National Budget month saw the local markets, except property, continue their upward trend, boosted by equities gaining over 3% and resources gaining 8%. In contrast to the UK, the retail sector struggled with both Woolworths and Truworths declining almost 9%. The listing of MultiChoice on 26 February caused some market interest as investors mulled over the future of pay television.
The FTSE/JSE All Share Index (ALSI) gained 3,41% on a total return basis in February, while bonds lost 0,44%. The SA Listed Property Index (SAPY) lost 5,70% and cash returned 0,55%. Internationally, the MSCI World Index gained 3,01% and the MSCI Emerging Markets Index gained 0,22%, both in dollar terms.
The rand lost 5,62% against the greenback and 4,89% against the euro.
For the year to date, the ALSI and ALBI returned 6,31% and 2,45% respectively. Listed property returned 8,79% and cash 1,16%. The MSCI World Index returned 11,02% in dollar terms over the same period.