As a new trading week kicks off, the global financial landscape is set for a series of significant events and developments that could shape market dynamics. From the impending Federal Reserve meeting to the resurgence of tech initial public offerings (IPOs) and the ongoing troubles of Evergrande, here’s what South African investors need to know:
Futures Point Higher
U.S. stock futures are signaling a positive start to the week, with investors eagerly awaiting key central bank policy meetings worldwide. As of 05:13 ET (09:13 GMT), the Dow Jones futures had gained 46 points or 0.1%, S&P 500 futures added 7 points or 0.2%, and Nasdaq futures climbed by 24 points or 0.2%. While the Dow managed a modest increase last week, the S&P 500 and tech-heavy Nasdaq experienced consecutive declines.
Lingering concerns about the global economic outlook were further compounded by reports of Taiwanese chipmaker TSMC delaying high-end semiconductor manufacturing equipment deliveries. This news cast a shadow over British chip designer Arm, which had a stellar initial public offering (IPO) in New York last week. Arm shares dipped by 4.5% in their second day of trading, though they remained well above their offer price.
Fed Decision Looms Large
Attention now turns to the U.S. Federal Reserve, which is widely expected to keep interest rates unchanged at a range of 5.25% to 5.50% after a two-day meeting concluding on Wednesday. Investors are keen to glean insights into the Fed’s outlook on inflation in the world’s largest economy for the remainder of the year.
August saw the biggest surge in consumer prices in 14 months, driven primarily by rising petrol costs. However, the underlying inflation rate slowed to its lowest point in almost two years. The Fed’s decision this week, along with meetings by the Bank of England and Bank of Japan, will have a significant impact on global markets. The Bank of England may opt for one final rate hike due to cooling economic conditions in the UK, while the Bank of Japan may provide clues about a potential shift from ultra-loose monetary policy.
Klaviyo and Instacart IPOs
Klaviyo, a marketing and data automation provider, is expected to revise its IPO price range upward, following Arm’s successful debut. The Boston-based company plans to increase the price band to $27 to $29 per share, up from its previous proposal of $25 to $27 per share. Klaviyo is set to price its share sale on Tuesday, reflecting a similar decision made by grocery-delivery service Instacart, which also raised its proposed IPO price range last week.
Arm’s stock surged by 25% on its first trading day, sparking hopes for a revival in an IPO market that had been hampered by economic uncertainty and rising interest rates. Both Klaviyo and Instacart will be closely watched by investors as they enter the market.
Evergrande’s Troubles Continue
Shares in China Evergrande Group plummeted after police detained employees at the company’s wealth management unit in Shenzhen. While details remain limited, the company’s stock tumbled by as much as 25% in early trading. Evergrande, the world’s most indebted real estate group with liabilities totaling $340 billion, had previously postponed a decision on offshore debt restructuring from September to October. The ongoing saga of Evergrande continues to raise concerns in global markets.
Crude Prices Extend Rally
Oil prices are on the rise, extending a recent rally fueled by expectations of a tighter crude market. Over the past three months, crude benchmarks have surged by over 30% due to supply cuts from Saudi Arabia and Russia, potentially pushing the market into a substantial deficit in the fourth quarter.
Investors are also closely monitoring this week’s series of interest rate decisions and subsequent statements from policymakers, as well as fresh economic data from China, the world’s top oil importer. As of 05:14 ET, crude futures traded 0.3% higher at $90.33 a barrel, while Brent crude gained 0.3% to reach $94.17.
In the week ahead, South African investors should keep a watchful eye on the Federal Reserve meeting, where interest rates are expected to remain steady. The tech IPO market is showing signs of life, with companies like Klaviyo and Instacart raising their price ranges. Meanwhile, Evergrande’s ongoing troubles in China are a source of concern, and the oil market continues to rally due to supply constraints and central bank decisions worldwide.