Daily Market Commentary - 06 December 2017 - Merchant West

Daily Commentary - 06 December 2017

Contact Merchant West Capital Markets on: (+2711) 305-9500 or treasury@merchantwest.co.za

- USD / ZAR 13.4778 - EUR / ZAR 15.9908 - GBP / ZAR 18.1108 -

Economic Events:

05 Dec : SA GDP - EC GDP - US Trade Balance

06 Dec : SA SACCI Business Confidence

07 Dec : SA Mining Production - US Initial Jobless Claims

08 Dec : US Change in Nonfarm Payrolls - US Unemployment Rate

Market Commentary:

On Monday, the rand lost some ground during the early hours of trading as the ANC`s leadership race kicked-off, with the markets adopting a cautious stance on the potential outcomes. As the race gained momentum, the rand soon recovered and moved to strengthen by 1.4% for the day as it appeared that Deputy President Cyril Ramaphosa came out on top and could potentially become the next leader of the ruling African National Congress (ANC).  With the party conference less than two weeks away, Jacob Zuma`s succession battle is enjoying close attention from market participants as they filter for clues on South Africa`s future policy trajectory and how the threat of a double-downgrade will be mitigated. Since the start of the race, markets have been favouring the business-friendly Deputy President, as opposed to Nkosazana Dlamini-Zuma who shares close ties with President Jacob Zuma. Cyril Ramaphosa is currently leading the race with 1,861 branch nominations from the nine provinces who have completed their general councils, compared to 1,309 for Nkosazana Dlamini-Zuma. However, markets should remain cautious as the biggest provinces are yet to cast their votes, which could prove to be Cyril Ramaphosa`s biggest challenge. On the JSE, the Top40 traded up 0.27% and the AllShare up 0.36%.

In US Markets, the Senate spent their weekend passing the controversial tax-bill, which provided temporary support for the greenback. However on Monday, the dollar gains slowed as markets wait for further progress in the proposed tax reform legislation. The Senate will now move into formal negotiations with the House of Representatives to materialise the final bill. The provisional bill included tax breaks for gas and oil partnerships, as well as real-estate investment trusts and banks. Derivative payments will also be excluded from tax calculations. The current version of the controversial tax-bill will now have to be reconciled between the Senate and the House of Representatives, but could take weeks to finalise.  “The upcoming negotiations on the bill between the Senate and the House are likely to decide the dollar’s direction this week,” said Shin Kadota, senior strategist at Barclays in Tokyo (source: Reuters).

In UK markets, the pound lost 0.1% against the US dollar, following a very volatile trading session the previous day. Market participants entered the week full of hope that progress would be made between the European Union and Britain regarding their divorce talks, but the pound lost ground after European Commission President Jean-Claude Juncker and British Prime Minister Theresa May failed to reach an agreement. Theresa May is understood to have broken off from talks with European Commission President Jean-Claude Junker to speak to DUP leader Arlene Foster. The UK had reportedly been prepared to accept that Northern Ireland may remain in the EU's customs union and single market in all but name, but Arlene Foster then said her party "will not accept any form of regulatory divergence" that separates Northern Ireland from the rest of the UK.

Our range for the day : R 13.42 -13.65