South Africa was rocked this week by leaked emails providing further evidence of the Gupta family’s influence over President Jacob Zuma and his family, key cabinet ministers and the boards of state-owned enterprises. Even so, President Zuma survived yet another attempt to remove him from his position at an ANC NEC meeting last weekend.
- US President Donald Trump announced plans to reduce spending on healthcare and food assistance programmes and increase military spending. The market welcomed the news.
- US new and existing home sales came in below expectations for April. The market expected 610,000 new and 5.65 million existing homes to be sold during the month, but only 569,000 new and 5.57 million existing homes were sold.
- In the UK, the FTSE100 gained 1.03%, near a record high.
- The Eurozone Manufacturing PMI climbed for the ninth consecutive month, up from 56.7pts in April to 57.0pts in May. This is the highest reading since April 2011.
- German Chancellor Angel Merkel said the euro is too weak at current levels as a result of the ECB’s expansionary policy. The euro appreciated by 0.17% on the back of the statement but depreciated 0.23% to $1.12 at the close of the week.
- Angel Merkel also suggested that Europe can no longer rely on America or Britain and must, “ ..take our destiny into our own hands.”
- Moody’s downgraded China’s sovereign credit rating for the first time since 1989. The main concerns were a rising Chinese debt burden and slowing economic growth.
- Emerging market currencies were mostly stronger last week. The Mexican peso and the Russian ruble appreciated 1.20% and 0.72% respectively.
- Ahead of the ANC NEC meeting last weekend, President Zuma’s relationship with the Guptas was once again put under the spotlight by the leaked emails and the release of an academic paper, Betrayal of the Promise: How South Africa is being stolen.
- The rand was one of the best performing emerging market currencies last week, closing 2.76% stronger –partly thanks to hopes that Zuma would be recalled.
- Consumer inflation was lower than expected at 5.3% in April 2017— below the March rate of 6.1% and the expected rate of 5.6%, Inflation is at its the lowest since December 2015.
- The South African Reserve Bank (SARB), as expected, left interest rates unchanged. If inflation continues to be moderate, there is a chance of a rate cut before the end of 2017.
- South African maize crops have performed especially well, yielding 101% more than last year.
- The JSE ALSI ended the week 0.79% lower, influenced largely by the resource sector losing 5.2%. The JSE Financial 15 Index gained 1.56% over the week.