The biggest news story from this week has been Trump’s flip-flop on his “zero tolerance” policy regarding children being separated from their parents at the US border and then having them held in detention centres. After a massive public outcry, as well as the apparent influence from his wife and daughter, Trump has signed an executive order to “keep families together.”
- This week, market volatility has been ruled by recent events – the Fed rate hike, EU tapering, and the ramping up of Trump’s trade war.
- During the week Trump continued to blame Democrats for his administration’s policy of separating immigrant children from their parents at the border.
- Trump still plans to prosecute the parents and jail entire families on military bases.
- Trade war rhetoric has continued to gain momentum between the US: China, Canada, the EU, and India.
- This week the US pulled out of the United Nation’s Human Rights Council citing an unfair treatment of Israel.
- After a vote in parliament, Theresa May will survive to fight another day. This may heighten the chances of a hard Brexit.
- Saudi Arabia and Argentina have been added to the MSCI Inc.’s group of emerging markets. This could potentially relieve some of the pressure that emerging markets have been under.
- The biggest local news story has been the volatility of the rand. Due to the international pressure of the potential trade war, emerging markets have been selling off. The rand is particularly vulnerable because growth is weak, and the South African Reserve Bank has put rates on hold. The rand was the second biggest loser this week after Turkey.
- The Eskom negotiations have continued this week after the power utility made an offer of 4.7% with inflation-adjusted increases over the next two years. This was rejected however as the unions are seeking a 9% gain in 2018, and 8.6% in 2019 followed by an 8.5% increase in 2020.
- Due to a greater contraction in exports than imports, South Africa’s current account deficit widened to 4.8% of GDP in the first quarter of 2018, from 2.9% in the fourth quarter of 2017.
- Steps have been taken to pave the way for universal healthcare in South Africa. The National Health Insurance Bill (NHI), was released for public comment yesterday. Health Minister, Aaron Motsoaledi, admitted at a press conference that there was no way of knowing the cost of the NHI in its entirety and that this would be up to Treasury to establish.
- Inflation has surprised economists by slowing from 4.5% in April to 4.4% in May.
- Global investor sentiment towards SA remains poor as evidenced in an article published by Bloomberg which states that emerging markets such as Argentina, Turkey, Brazil, Egypt, Indonesia, the Philippines and South Africa, should be avoided.