S&P 500 Powers Through 2600

Daily Analysis - 27/11/2017

Wall Street Bets on Strong Holiday Shopping Season


US equity markets’ record-busting year claimed another milestone on Friday after the S&P 500 closed above 2,600 for the first time ever, with retailers taking centre-stage amid signs of a strong start to holiday shopping. Trading volumes however remained light as some participants decided to take an extended break following Thursday’s Thanksgiving holiday.

US Businesses Receive Black Friday Boost

Long queues began forming by Thursday afternoon outside of most major retailers as shoppers got ready for Black Friday, while online sales also exhibiting a robust opening.

Figures from Adobe Analytics revealed that US consumers spent a record $7.90 billion in digital shopping on Black Friday and Thanksgiving, an increase of 17.90% from a year earlier. On the economic data front, a November survey of purchasing managers showed that the private sector grew at its slowest clip in four months. The IHS Markit Flash Manufacturing PMI slipped to 53.8 in November from 54.6 in October, while the Services PMI gauge fell to 54.3 from 54.6 in the prior month. S&P 500 futures rose 0.20% to finish Friday at 2,601, with all the three major US equity benchmarks notching their first weekly gain in three weeks.


Chinese Industrial Firms Weather Government Crackdown

Chinese industrial profitability maintained its recent growth trajectory in October, enduring a broad government crackdown on financial risks and pollution while underscoring the resilience in the world’s second biggest economy. Per data compiled by the National Bureau of Statistics, industrial profits climbed 25.10% year-over-year to CNY 745.40 billion (US$112.94 billion) last month compared to a 27.70% jump in September.

Despite the moderate slowdown, October’s growth pace was still the second-fastest recorded this year. More than half of last month’s profits surge came from mining, iron and steel smelting along with oil and natural gas extraction. In the first ten months of 2017, industrial firms recorded profits of CNY 6.25 trillion, rising 23.30% from a year ago and outpacing the 22.80% rise reported from January to September. USDCNH was last seen just below the highs of Friday around the 6.6000-mark.


South African Rand Tumbles on Credit Rating Cut

In another blow to the South African outlook, S&P revised their local currency debt rating to “junk” status on Friday after underscoring the country's outlook amid political development and stagnant economic activity.  S&P also slashed the rating on South Africa’s international debt by one notch, to ‘BB’ from ‘BB+', pushing it further into junk territory. The credit rating downgrade comes after Finance Minister Malusi Gigaba took investors by surprise last month by outlining a weaker growth outlook amid expanding government debt due to a widening budget gap.

Economic growth has decelerated notably, with business and consumer sentiment plunging to multi-decade lows amid heightened political uncertainty. Furthermore, plans to elect a replacement for current President Jacob Zuma next month at the African National Congress party meeting has also sunk investor confidence. The decision sent the USDZAR pair surging by close to 2.00% on Friday, with the pair trading modestly higher after the weekly reopening.


Canada Posts Wider Budget Deficit

An increase in governmental program expenses saw Canada’s budget deficit rise in September from a year earlier.  A report unveiled by the Federal Finance Department on Friday revealed a September shortfall of CAD$3.23 billion (US$2.54 billion), compared with a deficit of CAD$2.37 billion in the same period last year. Revenues grew by 2.70% on higher personal income tax receipts, however, intakes from corporate and excise taxes both declined.

Program expenses jumped 6.50%, largely due to higher social spending programs devoted to the elderly population and children. Canada’s Finance Minister Bill Morneau had last month updated the country’s fiscal and economic outlook, with the current fiscal year deficit forecast to come in CAD$19.90 billion, moderately narrower than an earlier estimate. USDCAD is stuck within a tight range around 1.2715 near the close of the Asian trading session.


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