A good news week! Many interesting and exciting things happened this week that could be small indicators for what the future holds. Christine Lagarde is set to replace Mario Draghi as President of the European Central Bank (ECB); the trade war between China and the US was placed on hold; and SARS is going after the Guptas.
- As Christine Lagarde prepares to step down from the IMF, it would appear that European governments are expecting to maintain the seven-decade tradition of selecting the leader of the IMF.
- After the G-20 Summit last week, a truce was announced between China and the US with the commitment from both parties to continue with the trade talks. Current tariffs will remain in place but will not increase, to allow for negotiations to continue. Additionally, restrictions on the Chinese tech firm, Huawei, will be eased, allowing the company to purchase US products.
- Softer US employment numbers sparked speculation that the Fed may lower rates to support growth. This news was a boost to emerging markets mid-week.
- President Donald Trump has picked two new economists to the Fed’s board. The only thing they have in common is that they both are likely to call for lower interest rates.
- The US trade deficit widened to a five-month high as imports surged to the most since 2015. This is an indicator of how the trade war is weighing on the US economy. Imports surged by 3.3% in the biggest increase in four years.
- Zimbabwe introduced its new currency this week, the RTGS dollar, after the country was forced to adopt the US dollar in 2009 as the country went through an economic meltdown and hyperinflation.
- Offshore markets have had a strong week with the MSCI ACWI gaining +-1.6% in USD in the afterglow of the US and China’s ceasefire.
- The Public Servants Association has questioned the ability of the Public Investment Corporation (PIC) to manage the country’s pension funds after the PIC bailed out Edcon following political pressure. Follow this link for more.
- It looks like SARS is preparing to come down with a heavy hand on the Gupta’s and their associates. SARS will be working with the NPA in order to bring the perpetrators to justice. SARS is more powerful than the NPA in this instance as the burden of proof with SARS lies on the taxpayer instead of with the State, as in criminal law.
- South Africa’s Business Confidence is edging higher, but it is still down on what it was a year ago. This is due to weak economic data and Eskom’s power blackouts at the start of the year.
- Steinhoff is suing former chief executive Markus Jooste and former financial officer Ben la Grange to recover salary and bonus payments.
- The rand continued to be volatile, strengthening to below R14/$ on Thursday, only to subsequently weaken to over R14.20/$ today, which is 1% weaker for the week. The ALSI bucked the global trend to 1.1% lower than last Friday’s levels.
Source: Dynasty, Daily Maverick, Moneyweb, Reuters, RMB, Aljazeera, and Bloomberg Markets, etc