Slasher's coffee beans

Jozi, Jozi. A horrible GDP number at the end of the morning was met at the same time with a sell off in Europe, so you could have been forgiven for thinking that we just sold off here based on reaction to those numbers. Later in the day, as matters were improving a little, we got a shot in the arm from consumer confidence numbers out of the US. Much better than anticipated. And would you believe that we ended the day in the green after wallowing for most of it in the red. Session end the Jozi all share index added 33 points to 22440.

OK, so those non growth numbers. Lets go, GDP for the first quarter showed a contraction of 6.4 percent quarter on quarter and remember that the quarter measured against was the one where the lights were out. Much worse than anticipated, the middle road suggested around three and a half percent contraction. I wonder why economists got it so wrong? Agriculture, which was starting to show some decent signs fell badly.

Construction still runs strong, just shy of double digit growth. These poor numbers suggest that the fellows over at the MPC probably have little choice, but to cut rates by 100 basis points tomorrow. And those who thought that perhaps we were done for the time being, again these numbers suggest that there might be some more at subsequent meetings. I guess the size of the cuts is an important matter. The new finance minister is set to brief folks on matters this afternoon.

MTN fell quite sharply yesterday, following a cracking day Monday. I guess some are running the numbers and there are a few question marks about both parties raising their debt levels higher than the comfort levels of current investors. I think that if the deal was to go ahead that Bharti, the secondary listing could be a compelling buy, in part because you get the India business full freight, plus you get almost half of MTN. We wait and see, still lots left in this deal, the exclusive period is a long time in this world.

Marius Kloppers has very different views to his peers over at Rio Tinto. Perhaps the fellows over at Rio Tinto are desperate because of their now excessive gearing. Kloppers said today (down under) that he saw a stabilization in prices but did not expect a sharp rebound in metals prices, BHP’s official view is that growth will be slow and protracted. The fellows at Rio thought there would be a V shaped recovery, saying this yesterday.

Kloppers added that resource companies with low levels of gearing that are well managed have a positive outlook. Of course he is referring to the company he manages and not that of Rio Tinto, which I suspect he feels does not have the best management and lets just say their dirty laundry on the excessive gearing has been aired for all to see.

New York, New York. The green shoots theory was just starting to be rubbished, people referring to weeds emerging from the rubble, others saying that the cold is here to stay. Some housing prices numbers in the form of the Case Shiller index seemed to back up that theory, the markets shrugged at the data as if to say, we know the housing markets are bad, and besides the data is from March. That is around 60 days ago, a lot happens in that time.

So, judging from the reaction to the blogs about the housing numbers, folks seem happy that the rate of the annual decline seems to be about the same, and the fact that house prices measured in the metro areas that matter suggest that the decline from the highs are 30 percent, hardly means there is anything to cheer about. And the same bloggers suggest that the move lower could be as much as 40 percent, so we are not out of the woods yet. Experience tells me that folks tend to overshoot on both sides and perhaps the data forward wont be as bearish.

What stoked markets in New York, and in a matter of minutes, was a much more cheerful consumer confidence number for the month of May, this is more recent. Folks obviously feeling that better equity markets and a stabilization of falling prices is something to feel cheerful about. Asset prices are looking better, therefore I am going to feel better about life. And feeling better about life has real implications for the economy.

General Motors on the brink of restructuring. I really do wonder how much of these headlines are having on consumers. Would you buy a product from a company that will be different in months? I guess you could argue that the company should emerge all the better for it. Don’t know the answer to that. Session end the Dow had managed to add 196 points to 8473, the nerds of NASDAQ added three and a half percent, 58 points to 1750 with the broader market S&P 500 up 23 points to 910.

The oil price had a heroic time in New York last night, and is still trading up at 62.47 Dollars per barrel. The copper price also had a great time of it, and currently is trading at 2.13 Dollars per pound. The gold price has been old off a little at 950 Dollars per fine ounce. The platinum price is lower at 1131 Dollars per fine ounce. The Rand is a little steadier again this morning at 8.26 to the US Dollar, 13.19 to the Pound Sterling and 11.54 to the Euro. One Rand is worth 5.76 Indian Rupees. And the Euro Dollar cross is 1.39.

US futures are slightly lower, Asia had a good time. As should we at the beginning of the day, some higher commodity prices, in particular the oil price.

Best Wishes

Sasha Naryshkine

sasha@vestact.com

011 447 8790