DAILY COMMENTARY - 30 APRIL 2019 | Merchant West


Merchant West Business Finance

Merchant West Capital Markets

USD/ZAR 14.3817 | EUR/ZAR 16.0811 | GBP/ZAR 18.6139

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JHB: (011) 305-9500 | PTA (012) 742-8600 | CPT (021) 552-7007 

email: treasury@merchantwest.co.za

Market Data:

30 April - SA Private Sector Credit | South Africa Budget | Trade Balance Rand

01 May - SA Workers Day Holiday | US - FOMC Rate Decision 

02 May - SA Manufacturing PMI | Electricity Production | Electricity Consumption | US - Initial Jobless Claims

03 May - US Change in Nonfarm Payrolls | Uneployment rate

Market Commentary:

South Africa's rand weakened on Tuesday as an unexpected slowdown in Chinese factory activity dented demand for risk assets, with investors increasingly cautious before local trade and budget data. At 08h40 the rand was 0.1 percent weaker at 14.3550 per dollar from an overnight close of 14.3400.The rand has see-sawed in a narrow range, with little momentum in either direction, as investors wait for a U.S. Fed policy meeting on Wednesday which is expected to keep lending rates unchanged.Locally, a Reuters poll of analysts forecast that March trade data, due at 1200 GMT, would show a 4.8 billion rand surplus. The Treasury is also due to publish monthly budget figures. Traders expect liquidity to be tight with local markets closed for the Worker's Day holiday before picking up in the run-up to national elections on May 8 (Reuters.com).

International markets - Shares in Asia fell on Tuesday as readings on China's manufacturing activity failed to meet expectations, underscoring weakness in the world's second-largest economy despite Beijing's attempts to spur growth. European equities were set to open mixed, with futures on London's FTSE up 0.1 percent but those on the German DAX 0.1 percent lower. Both official and private business surveys pointed to slower Chinese factory growth this month, dashing hopes for a steady reading or even a faster expansion. Data also showed a slower expansion in its services sector, adding to economic uncertainty. The dollar-denominated MSCI index of Chinese shares dropped 0.4 percent. But shares in Shanghai tilted up 0.3 percent as investors maintained hopes for additional stimulus measures to prop up the economy. Even before the China data, Asian investors had shrugged off cautious gains on Wall Street overnight that had lifted the S&P 500 index to an intraday record high of 2,949.52. The index finished up 0.11 percent at a record closing high of 2,943.03. The Nasdaq gained 0.19 percent to 8,161.85, also a record closing high, and the Dow Jones Industrial Average inched up 0.04 percent to 26,554.39. Investors were also cautious ahead of a two-day meeting of the policy-setting Federal Open Market Committee. The committee is set to release its latest statement at 2 p.m. EDT (1800 GMT) on Wednesday (Reuters.com).

International front -The IMF’s Director Christine Lagarde said on Monday she expects the United States and China to reach a deal to end their trade dispute, which has unnerved financial markets and cast a shadow over the global economy. "I would say 'Yes,'" Lagarde said at the Milken Institute Global Conference when asked whether talks between the world's two largest economies would end in a deal. Washington and Beijing have been engaged for the past year in a trade war marked by tariffs on billions of dollars in goods and threats of escalation. The talks are now at a critical point. U.S. Treasury Secretary Steven Mnuchin was scheduled to speak at the conference on Monday but was headed to China instead for talks. Lagarde was the first speaker at the annual conference, which draws 4,000 attendees including some of the world's most powerful thinkers and trendsetters to discuss finance, healthcare and other topics. Later on Monday, Blackstone Group LP Chief Executive Stephen Schwarzman also said he was positive about the prospects for a U.S.- China deal, but cautioned it would not solve all the issues being disputed. "I'm positive that they will come up with something that works, but it will not be a trade deal that solves all problems for all people and moves China into the modern world," he said. "There's a process of normalization that will take some period of time." Concerns have been mounting over a global slowdown, particularly in China and Europe, and the prospect that the decade-long U.S. bull market might be coming to an end. But the strong U.S. GDP growth data may prompt leaders to reassess the health of the economy, she said. Lagarde cautioned, however, that more data was necessary before making a more definite call. Even as inflation has been largely in check, a situation she called "highly mysterious," Lagarde said she expected price pressures to pick up "gradually and slowly" in the coming months, in part fueled by rising oil prices (Reuters.com).

South African Rand’s historical move after Elections: South Africa’s rand may be in for a rough ride after elections set for May 8, if history is any guide. Since the start of the post-apartheid era, the currency of Africa’s most-industrialized economy has tended to strengthen in the month before the vote, but weaken in the 30 days afterward, according to data compiled by Bloomberg. The outlier was 2009, when the rand was recovering from a record low reached during the global financial crisis (Bloomber.com).