“Keep dreaming, Bitcoin is never going to hit $100,000!” – Peter Schiff via Twitter, November 2019.
Soundbites for the week:
- Black Friday trades footfall for clicks
- Germany turns to fossil fuels
- Agriculture hurts South Africa’s gross domestic product
- Muted commodity price action
Black Friday worked from home
According to Mastercard’s SpendingPulse survey, United States (US) Black Friday retail sales grew by 3.4% over 2023. Traditionally known for creating a migratory force towards shopping malls and stores, Black Friday traffic has shifted more towards e-commerce activity. Adobe Analytics reported that shoppers spent a record $11 billion online with over half of those transactions happening over a mobile device. In-person shopping fell 3.2% over the last year according to US footfall tracker, Sensormatic Solutions. According to cloud-based customer relationship management platform Salesforce, global Black Friday spend was $74 billion strong.
Retailers have adapted to the times by expanding their sales windows to include weeks before and after Black Friday. Similar trends have been noted in China where promotions for Singles Day (their Black Friday equivalent) were spread over 29 days this year up from 19 days last year.
The case of the $6.2 million banana and Bitcoin hits $100,000
A bit of potassium makes for a great post-workout snack but most would typically avoid the $6.2 million banana duct taped to the wall. This is what crypto mogul, Justin Sun did after acquiring the controversial artwork by Maurizio Cattelan, ironically named Comedian. Such antics come as no surprise as bitcoin rallied to $100,000 and beyond to the chagrin of perennial naysayers.
“When France sneezes, Europe catches a cold”
This is an adage which will be put to the test following the collapse of the country’s government for the first time since 1962. Prime Minister Michel Barnier was ousted following a no-confidence vote only three months after his appointment. In the absence of a majority coalition in parliament, France will be vulnerable to further disruption. French 10-year government bond yields at 2.893% are now comparable to Greece’s 2.895%…sacré bleu.
Dunkelflaute
A word used by the Germany’s renewable energy sector to describe a period of low wind speeds, dunkelflaute is shrinking the country’s renewables output. For two consecutive months, Germany’s low wind speeds led to a 25% reduction in wind power generation in October and November, relative to similar months in 2023 when wind provided 16 terawatt hours (TWh) per month. In a bid to fill the generation gap, Germany’s gas-fired generation increased at the fastest pace on record from 5.3 TWh in October to 9.55 TWh last month. Coal-fired power production also jumped to a 20-month high as low temperatures made Germany’s power grid one of the highest emitting across Europe.
DATA IN A NUTSHELL
The US ISM Manufacturing Purchasing Managers’ Index (PMI) climbed to 48.4 in November from 46.5 the previous month. While a PMI below 50 signals a manufacturing contraction, the progress is positive and was led by an expansion in new orders, and an improvement in employment. ISM Services PMI for November was 52.1 which disappointed expectations of 55.7 and was led by a decline in new orders and employment.
China’s PMI data for November was a harder read given the noise induced by the US President Elect, Donald Trump’s sabre-rattling on tariffs. China’s Caixin Manufacturing PMI reached 51.5 ahead of the expected 50.6 as new orders rose at their fastest pace since February 2023. This was likely driven by US importers stockpiling supplies to hedge against higher tariffs on Chinese goods. Interestingly, China’s Caixin Services PMI fell to 51.5, which was below expectations of 52.4. China’s services expansion has been its economic silver lining amid a softening economic backdrop, making any sustained weakness a concern.
South Africa’s quarter-on-quarter gross domestic product contraction of 0.3% failed to meet expectations of 0.4% growth in the third quarter. The disappointment was caused by a weakness in the agriculture and transport industrials and follows the decent 0.4% reported growth for the second quarter. Excluding agriculture, which declined by 29%, the economy grew by 0.4%.
Germany’s October factory orders contracted by 1.5% month-on-month following a 4.2% expansion in September. Despite the decline in order, forecasters expected a 2.0% decline. Excluding large-scale orders, Germany’s factory orders were flat. A slight positive was the upward revision of September’s factory order growth from 4.2% to 7.2% month-on-month.
Equities
The leading sectors in the US over the week were consumer discretionary (+3.9%), technology (+3.8%), and communication services (+2.4%) while home builders (-2.9%) and utilities (-2.3%) led the rear. The S&P 500 held above the 6,000-point mark reaching an all-time high tick of 6,094 during Thursday’s session. Super Micro Computer was the S&P 500’s winner notching an +18.8% return over the week, and well ahead of Tesla (+10.7%) which took second place.
The German Stock Index (DAX) has bucked the country’s lacklustre economic narrative to reach an all-time high level of 20,273.64 points. Discretionary and technology stocks led the charge with the top five performers being Zalando, SAP, BMW, Adidas, and Infineon Technologies.
The FTSE/JSE Capped Top 40 Index outperformed its global counterparts, advancing 2.5% in dollar-terms. Naspers (+7.9%) advanced the most during the week, followed closely behind by Pepkor (+6.4%), and Remgro (+6.0%). Precious metals dominated the laggards as Northam Platinum (-3.7%) fared the worst over the week.
Commodities
We saw little movement in commodities with both the Bloomberg Commodities and Industrial Commodities indices remaining flat over the week. Copper futures rose by 1.7% to $4.13/pound over the week following a strong Tuesday session though signs of weakness were visible on Thursday. Iron ore continues to be weighed by China economic growth uncertainties, dropping by 1.1% to $102.85/metric ton.
While oil prices were flat over the week, both West Texas Intermediate and Brent prices seesawed to close at $68.50 and $72.26 per barrel, respectively. The Organisation of the Petroleum Exporting Countries (OPEC+) released a written statement that it would delay its plans to raise production by three months. This is the third time OPEC+ has pushed out its anticipated 180,000 barrels per day increase amid a soft crude oil price setting. Global demand concerns persist as China’s slowdown impacts prices, while rising US and Canadian supplies risk adding to a 2025 glut. The possibility of tighter oil supply if stricter oil sanctions are imposed on Iran and Venezuela by the incoming US government could play into OPEC+’s postponing.
Gold prices followed bond yields lowering during the week with the precious metal struggling to stay above $2,650/ounce in anticipation of the crucial US Nonfarm Payrolls (NFP) data on Friday.
Currencies
The US Dollar Index slipped below 106.00 ahead of November’s NFP release, pressured by weak labour market data, including rising jobless claims and layoffs released on Thursday. Traders anticipate a dovish shift from the Fed if soft economic trends persist, with Friday’s NFP results likely to shape near-term US dollar momentum.
The euro hovered near $1.05/€, pressured by political instability in France and expectations of further European Central Bank rate cuts. While strategists see limited rebound potential, most anticipate it avoiding parity with the dollar, citing already priced-in downside risks.
The South African rand picked up strength towards the end of the week, as it looks to retest the R18.00/$ mark. The rand was last below R18.00/$ in mid-November when it strengthened by 1.67%, reaching R17.50/$.
Key indicators:
USD/ZAR: 18.03
EUR/ZAR: 19.10
GBP/ZAR: 23.03
GOLD: $2,641
BRENT CRUDE: $71.87
Sources: Bloomberg, Investopedia, Reuters and FXStreet.
Written by Citadel Senior Equity Analyst and Advisory Partner, Thambo Mthwalo.
Please note that the last edition of the Weekly Wrap for 2024 will be published next week, 13 December. Publication of the Weekly Wrap will resume on 17 January 2025.