LOCAL

The JSE All Share Index climbed steadily over the last 2 weeks, breaking 34,000 on the 1st of February and remaining there until Friday last week when SA stocks fell 1.3%, booking their first weekly decline since the start of 2012. The drop was attributed to complications with the long-awaited Greek debt deal, prompting investors to cash in resources firms.

Anticipation regarding the announcement to be made on Saturday by President Jacob Zuma, Gill Marcus, and Pravin Gordhan, added to the uncertainty. The Rand tumbled over 2% against the dollar as investors feared major policy or personnel changes. But the announcement that new South African bank notes will bear the image of President Mandela was positively received. The rand firmed after the panic settled and local bonds also rebounded in line with the currency. The JSE All Share Index was back up 0.96% to 34,219 by 14h00 on Monday.

President Jacob Zuma’s state of the nation address on Thursday highlighted a focus on economic development and pledged infrastructure developments that would "facilitate the movement of coal and other minerals to ports and global markets that has long been a hindrance”. The announcement of potential savings of R1bn for business on port tariffs and the continued focus on growth and job creation was welcomed. However, although 365,000 people were employed in 2011, the average target of 500 000 per year was not achieved. Observers felt that he neglected other areas of concern, notably mining regulation. President Zuma responded on Friday when stating during a television breakfast briefing that state control or ownership of the mines could not work.

Economists eagerly await the National Budget Speech scheduled for 22 February, in which it is hoped that the Finance Minister will respond to reports that the ANC’s policy research document has proposed a 50% tax on super profits and a tax regime that is ripe for reform.

EUROPE

Tension has been building as Greece nears its March 20th deadline when the country must find 14 billion euros to meet debt repayments, or face the prospect of a chaotic default. Euro zone officials have said February 15th marks a cut off point for agreement on a new bailout.

Protestors hurled stones and petrol bombs outside parliament in Athens on Sunday while lawmakers inside were debating a bill setting out 3.3 billion euros in wage, pension and job cuts as the price of a 130-billion-euro rescue package from the European Union and International Monetary Fund, Greece's second since 2010.

Greece moved a step closer early on Monday to securing the new rescue funds when parliament approved the deeply unpopular austerity bill. This lifted the euro and European shares on Monday, although with further steps needed before the shadow of a debt default can be lifted, gains may be limited.

The approval of the austerity bill spurred recovery after the S&P 500 suffered the year's biggest loss on Friday. The FTSEurofirst 300 of top shares, which fell 0.9% to a one-week low at the end of last week, opened 0.3% higher at 1066.76 points.

However, the optimism is likely to be short-lived. According to a Reuters’ poll published last month, a majority of economists expect the Euro zone to contract further in the current quarter, which would formally signal a Euro zone recession, including even Germany.

USA

US stocks fell at the open on Friday as the most recent flare-up in Greek negotiations for a financial bailout package put the S&P 500 on track to snap a three-day winning streak. For the week, the Dow was down 0.5%, S&P was down 0.2% and the Nasdaq was down 0.06%.

It has been reported, however, that the demand for risky assets is strong. There is steady buying in the market, and the money is constantly being put to work. The market is overlooking the weak 2011 earnings and looking forward to an improved 2012 earnings season.

Last week Fed Chairman, Ben Bernanke, reiterated his plans to hold interest rates at record lows until late 2014. Many economists were looking to see if Bernanke might waver on that stance after last week's news that hiring surged in January and the unemployment rate fell to a three-year low of 8.3%.

Despite the optimism in the stock market, options traders are bracing for more volatility ahead.

OIL

Crude oil prices rose on Monday, back towards six-month highs as demand sensitive assets were boosted after Greece approved an austerity bill. Oil was near highs not seen since the start of August, as more encouraging data from the United States and China has improved the demand outlook.

The oil price is currently at $118.30 per barrel of Brent Crude.

GOLD

Gold prices were up as well on Monday in response to the latest news on Greece. Spot gold was up 0.5% to $1,728.59 an ounce at 11h00 GMT, while US gold futures for February delivery were up $5.70 an ounce to $1,731.00.

The gold price is currently at $1,727.60 per fine ounce.

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Article by: Mikayla Collins CFP^®, Paraplanner - NFB Private Wealth Management
Phone: +27 (043) 735 2000  |  Fax:  +27 (043) 735 2001  |  Email: mcollins@nfbel.co.za