After a gloomy midweek, global markets have recovered slightly, despite the multiple adversaries, the biggest of which is the ongoing trade war. The soap opera of current politics continues to grasp attention from the concern of a potential global recession.
- The ISM Manufacturing Index, which tracks manufacturing activity in the US, posted the biggest contraction in September since the end of the 2007-2009 recession, reflecting a slowdown in the US and global economies, exasperated by the US-China trade war. After the markets recovered slightly, this was less of a concern later in the week.
- Prime Minister Boris Johnson has been given a week by the EU to revise his Brexit deal or risk postponing his 31 October deadline. Prime Minister Johnson did, however, reiterate that postponement was not an option and Britain would be leaving the EU with or without a deal.
- President Trump, in a move that is brazen even for him, publicly encouraged China to investigate Joe Biden, despite an ongoing impeachment inquiry taking place after he asked Ukraine to do that same thing.
- This week the US expanded the trade war to EU goods, targeting European aircraft, cheese, and whiskey in a new round of tariffs. The EU has not yet retaliated.
- US job growth figures increased moderately in September, with the unemployment rate dropping to near a 50-year low of 3.5%, assuaging financial market concerns that the slowing economy was on the brink of a recession amid continued trade tensions.
- The unrest in Hong Kong is impacting the tourist market retail sales figures have plunged by 23% year-on-year. As the protests get increasingly violent, so does the pressure on the international community to support democracy and human rights.
- Despite the above concerns and the mid-week sell-off, the S&P was only down 0.8% for the week, as at the time of writing.
- President Cyril Ramaphosa pledged to UN secretary-general Antonio Guterres, while at a climate summit in New York, to invest R160 billion into converting Mpumalanga’s coalfields into a renewable energy haven.
- The Institute of International Finance (IIF) reported that South Africa’s public debt could rise to 95% of the gross domestic product by 2024 if Eskom continues to be a drag on the economy.
- The South African Reserve bank has said that the fiscal picture has “deteriorated sharply”. Reporting that deteriorating state finances, and policy uncertainty, are having a negative impact on the ability of monetary policy to support economic growth.
- Eskom Holdings’ stand-alone credit profile was downgraded one notch at Fitch Ratings, signalling South African power utility’s worsening ability to repay the debt without additional government support.
- Transnet has let go of a senior supply chain official after allegations relating to the Gupta linked 2012 Chinese locomotive deal. Edward Thomas was suspended last year but was finally fired this week.
- South African private sector activity contracted in September for its fifth consecutive month. IHS Markit’s PMI fell to 49.2 in September from 49.7 in August, remaining below the 50-point mark that separates expansion from contraction.
- The Finance Minister’s economic plan is being taken to an NEC alliance summit for discussion. This could very likely be the end of the road for the document as both the SACP and Cosatu have already expressed opposition to the proposal.
- South Africa’s trade balance swung to a R6.84 billion surplus in August. The South African Revenue Service said that exports rose 8.4% on a month-on-month basis to R122.02 billion in August, while imports were down 1% to R115.17-billion.
- The Competition Commission’s health market inquiry has finalised its investigation into the private health-care market, delivering a hard-hitting assessment of its failures and proposing reforms that place the ball firmly in the court of the department of health.
- Follow this link for an article written by Constitutional law expert, Professor Pierre de Vos, analysing why the National Prosecuting Authority (NPA) is in a state of paralysis. This is not all doom and gloom though, as President Ramaphosa has set up a collaborative Special Investigative Directorate inside the NPA. The cogs of justice are moving, just very slowly.
- The rand also faced a mid-week selloff, which saw it fall to R15.40/$ intra-day on Wednesday, but it has since recovered to be stronger for the week, trading at R15.05 at the time of writing. The ALSI recovered slightly on Friday but nonetheless closed down 2.2% for the week.