Daily Commentary - 6 November 2018

Merchant West Business Finance

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

USD / ZAR 14.1897 - EUR / ZAR 16.1883 - GBP / ZAR 18.5342 -

Economic Events:

06 November: EC PMI Data

07 November: GE Industrial Production - EC Germany CPI Data ; Retail Sales - US MBA Mortgage Applications

08 November: US Initial Jobless Claims ; FED Interest rate decision

09 November: UK GDP Data - US PPI Data ; University of Michigan  Sentiment

Market Commentary:

Domestic Front - South Africa's rand firmed in late afternoon trade on Monday, recovering from losses earlier in the session, as a dollar rally paused with investors taking profits before U.S. midterm elections that may fuel a bout of volatility for global markets. Stocks gained for a fourth consecutive session as positive risk sentiment upheld.

At 17h18, the rand traded at 14.2175 per dollar, 0.39 percent firmer than its close on Friday. The rand had earlier in the day weakened nearly one percent to 14.4100 as risk appetite waned. "The number of different risk events for global markets this week means that volatility in the rand is something that investors should not rule out of the equation," said Jameel Ahmad, global head of currency strategy and market research at FXTM. "This week is widely expected to be another wild one for emerging markets with the Federal Reserve meeting and upcoming U.S. mid-term elections something that investors will monitor very closely."

Investors head into Tuesday's U.S. congressional election with the Democratic Party facing a strong chance of winning control of the U.S. House of Representatives, with Republicans likely to keep the Senate. The yield on the South Africa's benchmark government bond due in 2026 fell 3.5 basis points to 9.15 percent.

In equities, the all-share index rose 1.19 percent to 54,915 points while the blue chip top 40 was 1.24 percent firmer at 48, 537 points. The banking index rose 1.54 percent. “It seems the bullish sentiment is coming back into the market and the recovery we saw on Thursday and Friday last week is carrying on," said Greg Davies, equities trader at Cratos Capital. Gold shares were 2.55 percent higher, led by AngloGold Ashanti Ltd which soared nearly 7 percent in the session after the company reported an 11 percent fall in costs and reduced debt.

International front - China is ready to hold discussions and work with the United States to resolve trade disputes because the world's two largest economies stand to lose from confrontation, Vice President Wang Qishan said on Tuesday. Beijing and Washington have imposed tit-for-tat duties on each other's goods over recent months, with neither side backing down from an increasingly bitter trade dispute that has jolted financial markets and cast a pall over the global economy.

The focus is now on U.S. President Donald Trump's meeting with Chinese President Xi Jinping at the end of the month. Trump has threatened to impose further tariffs on $267 billion of Chinese imports into the United States if the two countries cannot reach a deal on trade. “Both China and the U.S. would love to see greater trade and economic cooperation," Wang told the Bloomberg New Economy Forum in Singapore. “The Chinese side is ready to have discussions with the U.S. on issues of mutual concern and work for a solution on trade acceptable to both sides," he said.” The world today faces many major problems that require close cooperation between China and the United States," he said. "It is our firm belief that China and the U.S. will both gain from cooperation and lose from confrontation."

"Trade and economic cooperation remain the anchor and propeller of a steady and healthy China-US relationship which is in essence mutually beneficial. China will stay calm and sober-minded, embrace greater openness and work for mutual benefit. “The United States and China will hold the top-level diplomatic and security dialogue in Washington on Friday, the U.S. State Department said. Trump, who is expected to meet Xi at the G20 summit in Argentina later this month, said on Monday China wants to make a deal. "If we can make the right deal, a deal that's fair, we'll do that. Otherwise we won’t do it." (Reuters)

Our Range for today: R14.1000 - R14.4000