Market outlook for the day – Thursday 29 July 2010 

South African equities were marginally positive this morning, moving in and out of positive territory. Despite a weak close in the Asian and Australian trading sessions, European equities were stronger today and US futures are also pointing to a positive open in the US markets later this afternoon. Commodity prices are generally stronger this morning and are likely to help boost the local morning trading session.

Other news:

Private sector credit extension

Demand for credit from South Africa's private sector grew in annual terms for a second month in June but the rise was below forecast and still minimal, bolstering the case for another cut in interest rates. After eight consecutive months of decline, credit demand rose 0.92 percent year-on-year compared to 0.8 percent growth in May, while the M3 measure of money supply accelerated to 2.41 percent year-on-year from 1.4 percent previously.

News in the financial press:

Business Day:

- Inflation slowdown raises speculation about rate cut

- ArcelorMittal CEO hits at settling with Kumba Irone Ore

- "Poor will suffer" from a cheaper rand

Business Report:

- Unions set on state strike

- Labour Minister wants to punish employment equity offenders

What happened yesterday?

South African Market

South Africa's government bonds firmed on Wednesday after softer-than-expected inflation data, and stocks declined as mining shares weighed. Inflation slowed more than expected in June, raising hopes of another rate cut before year-end. The yield on the benchmark 2015 bond fell 10.5 basis points to 7.58 percent and that on the 2036 note was down 11 basis points to 8.505 percent.

Wall Street

U.S. stocks fell on Wednesday after weak durable goods figures and a downbeat assessment of the economy from the Fed's Beige Book kept the benchmark S&P 500 trapped below its 200-day moving average. The Dow Jones industrial average dropped 39.81 points, or 0.38 percent, to 10,497.88. The Standard & Poor's 500 Index  dropped 7.72 points, or 0.69 percent, to 1,106.12. The Nasdaq Composite Index dropped 23.69 points, or 1.04 percent, to 2,264.56.

Global Markets

Asian stocks edged down from a three-month high and the dollar eased towards three-month lows on Thursday, hit by soft U.S. data that underlined the patchy nature of the U.S. economic recovery. The MSCI index of Asia Pacific shares ex-Japan edged down 0.2 percent.

Commodity and currency report

Gold bounced higher on Thursday as the U.S. dollar weakened and physical buying picked up, but gains are seen limited after holdings in the world's largest gold-backed ETF fell to the lowest since early June. Premiums for gold bars edged up in Asia, but although jewellers were happy to buy at lower levels, uncertainties in the outlook for the U.S. economy and poor technicals weighed on sentiment. Other precious metals tracked bullion higher.

Spot gold added $4.10 an ounce to $1,166.65 an ounce by 0602 GMT after falling as low as $1,156.90 on Wednesday, its weakest since late April. Bullion hovered below the 50-day and 100-day moving averages. The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings fell to 1,282.279 tonnes by July 28 from 1,300.829 on July 27 -- their lowest since early June. The holdings hit a record at 1,320.436 tonnes on June 29. Cash gold was nearly 8 percent below a lifetime high around $1,264 struck in June, when investors poured money into bullion on worries the euro zone debt crisis would spread. U.S. gold futures for August delivery rose $5.8 $1,166.2 an ounce. Gold bars were offered at a $1.50 premium to the spot London prices in Hong Kong, up from $1.20 on Monday. In Singapore, premiums rose to $1.50 from between 80 cents and $1.20 earlier this week, while dealers in Tokyo pushed up the differentials to $1 from 50 cents.

The U.S. dollar slipped towards three-month lows against a basket of currencies on Thursday as investors cut their positions due to fresh evidence of a patchy recovery in the U.S. The European Central Bank will likely wait until late 2011 before hiking interest rates, according to a Reuters poll of over 70 economists who stayed cautious in July despite some encouraging economic data.

The Nikkei ended down on Thursday as U.S. stocks slipped after weak durable goods figures and a downbeat assessment of the economy from the Fed's Beige Book kept the benchmark S&P 500 trapped below its 200-day moving average.