- We have seen Mexico’s currency fall sharply since Trump was elected. The euro itself is trading near its lowest level versus the dollar in 13.5 years at $1.063 to the euro (hit $1.60 in 2008 and $1.50 in 2011). The Chinese currency is down -6.4% against the dollar so far in 2016, at its lowest level in 8 years.
- Meanwhile, the world’s leading and biggest stock market, the US market, has been hitting new record highs over the past week.
- In the US, the latest economic data has strengthened the case for an interest rate hike.
– Housing starts swelled by 25.5% to 1.32 million;
– Initial jobless claims fell to 235 000, a 43-year low;
– In October, consumer inflation increased at its fastest rate in six months.
• A rate hike in December looks likely in an economy that has shown real improvement. The forward rates are now pricing in a 100% chance of a rate hike in December and, what is perhaps more interesting, the level of the expected rate hike is now 50-75 bps (0.5% – 0.75%).
• The US dollar has surged seeing the trade-weighted dollar index up 4.9% over the past 13 days, to its highest level in 13 years.
• Within the S&P 500 Index in 2016: The Oil sector is up 18%, Financials are up 14.6%, Minerals 11.1%, IT 10.6%, Health Care has dropped by -3% and Real Estate has fallen by -5%.
• In the Euro area, preliminary GDP Q3 was confirmed at 0.3% quarter-on-quarter, similar to Q2.
• In China, October data has shown that the near-term recovery has continued. Housing investment has increased, there is stable industrial production but, consumption growth has slowed in the introduction of Q4.
• Chinese real estate investment increased to 6.6% from 5.8% year-to-date.
• Infrastructure investment in China is secure at 19.4% year-to-date. The rise in manufacturing investment retracted to 3.0% from 3.2%.
• In commodities, the copper price is up 12.4% in November – its highest in 21 months. The iron ore price is up 31.7% since the end of September – its highest in two years.
• In SA, retail sales came in higher than expected in September, increasing by 0.6% month-on-month, while consensus estimated an increase of 0.2% month-on-month.
• Ahead of the upcoming rating review (Moody’s to announce on Friday, 25 November 2016, and S&P, Friday, 2 December 2016) government, business, and unions could sign an agreement on a range of labour market reforms. Including prevention of long, violent strikes and agreeing to consider a monthly minimum wage.
• This week, the South African Reserve Bank (SARB) is scheduled to hold its November Monetary Policy Committee (MPC) meeting. It is anticipated that the SARB will keep the policy rate unchanged at 7%.
• On the local equity front, while the heavily offshore-oriented JSE ALSI 40 Index is -1.1% so far in 2016 (total return including dividends), the JSE Mid-Cap Index has returned +21.5% and the JSE Small-Cap Index +19% so far this year.
Source: Dynasty, Stanlib, Efficient Select, Prescient, Moneyweb & Bloomberg Markets etc.