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In our continued efforts to give our readers a broad number of views, opinions and information, we continue to provide PSG's daily market updates and add our own daily rant at the end.
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Short summary of PSG's market commentary for 17 January 2019
South Africa
Brexit uncertainty failed to sour the mood on global markets and the JSE, lifted by news of Chinese stimulus plans. Gains on the local bourse were extended in the afternoon, when US markets opened higher. The All Share rose 0.49%.
United States
Wall Street's main indexes hit a one-month high on Wednesday, boosted by upbeat earnings from Bank of America and Goldman Sachs, with a multi-billion dollar deal in the fintech sector also helping a risk-on trade. Shortly after the JSE closed the Dow was up 0.59%.
Europe
Global markets had seemingly priced in UK Prime Minister Theresa May's defeat in the UK parliament on Tuesday night, with the pound remarkably stable despite the scale of her loss. Shortly after the JSE closed the FTSE 100 had lost 0.47%.
Hong Kong
Hong Kong shares rose on Wednesday, helped by hopes that a shift to more stimulating policy could boost China’s economy. At the close of trade, the Hang Seng index was up 0.27%.
Japan
Japanese shares retreated from a four-week high on Wednesday as investors took profits on firms exposed to China’s economy a day after they enjoyed a boost from Chinese stimulus hopes. The Nikkei share average dropped 0.55%.
Rand
The rand was mixed at the JSE’s close, 0.12% weaker at R17.68/£, but 0.21% firmer at R15.64/€. Against the dollar, the rand was flat at R13.73/$.
Precious metals
Gold held steady on Wednesday, supported by a slight retreat in the dollar while gains were capped by a modest recovery in equities, as caution set in ahead of a no-confidence vote on British Prime Minister Theresa May’s government. Spot gold was unchanged at $1 293.86 at 20h15.
Oil
Oil prices steadied on Wednesday after climbing about 3% in the previous session on the expectation that Opec-led production cuts will tighten supply and that possible Chinese stimulus might help the global economy. Brent crude oil futures were at $60.49 a barrel at 20h15.
Brexit uncertainty failed to sour the mood on global markets and the JSE, lifted by news of Chinese stimulus plans. Gains on the local bourse were extended in the afternoon, when US markets opened higher. The All Share rose 0.49%.
United States
Wall Street's main indexes hit a one-month high on Wednesday, boosted by upbeat earnings from Bank of America and Goldman Sachs, with a multi-billion dollar deal in the fintech sector also helping a risk-on trade. Shortly after the JSE closed the Dow was up 0.59%.
Europe
Global markets had seemingly priced in UK Prime Minister Theresa May's defeat in the UK parliament on Tuesday night, with the pound remarkably stable despite the scale of her loss. Shortly after the JSE closed the FTSE 100 had lost 0.47%.
Hong Kong
Hong Kong shares rose on Wednesday, helped by hopes that a shift to more stimulating policy could boost China’s economy. At the close of trade, the Hang Seng index was up 0.27%.
Japan
Japanese shares retreated from a four-week high on Wednesday as investors took profits on firms exposed to China’s economy a day after they enjoyed a boost from Chinese stimulus hopes. The Nikkei share average dropped 0.55%.
Rand
The rand was mixed at the JSE’s close, 0.12% weaker at R17.68/£, but 0.21% firmer at R15.64/€. Against the dollar, the rand was flat at R13.73/$.
Precious metals
Gold held steady on Wednesday, supported by a slight retreat in the dollar while gains were capped by a modest recovery in equities, as caution set in ahead of a no-confidence vote on British Prime Minister Theresa May’s government. Spot gold was unchanged at $1 293.86 at 20h15.
Oil
Oil prices steadied on Wednesday after climbing about 3% in the previous session on the expectation that Opec-led production cuts will tighten supply and that possible Chinese stimulus might help the global economy. Brent crude oil futures were at $60.49 a barrel at 20h15.
Our daily rant..
On the local front, the South African Reserve Bank (SARB) monetary policy committee (MPC) will announced their latest interest rate decision today. We believe interest rates will remain unchanged, especially considering the massive decline in fuel prices over the last 3 months, which will assist in moderating inflation levels going forward. We still believe the MPC made a mistake by raising interest rates in November 2018, putting unnecessary additional pressure on South African consumers, when by the SARB's own forecasts their long term expectations of inflation was lowered at the November 2018 meeting. It is our belief SARB was not acting in the best interest of inflation when they raised interest rates in November 2018, we believe they raised interest rates to protect the vulnerable Rand.
An article published on Fin24.com covers economists expectations on the rate increase too. Below an extract from the article that can be found here.
Article extract starts
PwC said earlier this week that the central bank was unlikely to raise rates again this time due to fears around the global economy dampening oil prices and offering a petrol price reprieve, "US equities jitters" that may slow down the pace of the US Fed's monetary policy tightening, and the SA economy's weak demand pressures.
PwC noted, however, that the SARB had signalled at the beginning of the interest rate hiking cycle in November that it may raise rates three times by 25 basis points each before the end of 2020. Investec economist Annabel Bishop, in a note to clients, also indicated that she expects interest rates would remain unchanged for the first half of 2019. "Contrary to the timing of the last MPC meeting in November 2018, the start of 2019 has seen risk-aversion abate somewhat in global markets as commentary from US monetary authorities has become less hawkish," she said.
Domestically, risks for SA abound, said Bishop, ranging from fiscal performance and the threat of credit rating downgrades, to the upcoming national election. Nedbank Corporate and Investment Banking also said it expected the central bank to keep interest rates on hold on Thursday.
"We see marginally lower headline inflation in 2019, but believe the bias is still for a hike by the SARB later this year," it said in a statement.
End article extract
An article published on Fin24.com covers economists expectations on the rate increase too. Below an extract from the article that can be found here.
Article extract starts
PwC said earlier this week that the central bank was unlikely to raise rates again this time due to fears around the global economy dampening oil prices and offering a petrol price reprieve, "US equities jitters" that may slow down the pace of the US Fed's monetary policy tightening, and the SA economy's weak demand pressures.
PwC noted, however, that the SARB had signalled at the beginning of the interest rate hiking cycle in November that it may raise rates three times by 25 basis points each before the end of 2020. Investec economist Annabel Bishop, in a note to clients, also indicated that she expects interest rates would remain unchanged for the first half of 2019. "Contrary to the timing of the last MPC meeting in November 2018, the start of 2019 has seen risk-aversion abate somewhat in global markets as commentary from US monetary authorities has become less hawkish," she said.
Domestically, risks for SA abound, said Bishop, ranging from fiscal performance and the threat of credit rating downgrades, to the upcoming national election. Nedbank Corporate and Investment Banking also said it expected the central bank to keep interest rates on hold on Thursday.
"We see marginally lower headline inflation in 2019, but believe the bias is still for a hike by the SARB later this year," it said in a statement.
End article extract