finweek

In the markets: What to watch this week

Giacomo Bonavera is head of foreign exchange trading at Capilis Asset Managers.
Giacomo Bonavera is head of foreign exchange trading at Capilis Asset Managers.

Last Wednesday, Deputy President Cyril Ramaphosa announced that an agreement, which still needs to be signed by Cosatu, has been reached on the proposal of a R3500 monthly minimum wage. This would be implemented in May next year. With that in mind, employment figures and the effects of inflation will come into the spotlight this week.

Ramaphosa indicated that government recognises that the amount is nowhere near acceptable levels as a study recently found that a household of four people requires R5000 per month to remain sustainable.

Last month unemployment figures climbed from 26.6% in the third quarter of 2016 to 27.1% in the fourth quarter, but employment rose faster than unemployment as more people joined the labour force, bringing the participation rate up to its highest since 2002.

The unemployment rate in South Africa averaged 25.35% from 2000 until 2016, reaching an all-time high of 31.20% in the first quarter of 2003 and a record low of 21.50% in the fourth quarter of 2008.

Unemployment figures are due tomorrow at 11:30AM.

Another interesting figure is that of inflation because trade unions negotiate higher minimum wages based on keeping up with the cost of living.

Consumer prices in South Africa rose 6.8% year-on-year in December last year, following a 6.6% increase in November and above market expectations of 6.5%. It was the highest inflation rate since February as cost increased at a faster pace for food and non-alcoholic beverages as well as housing and utilities.

Looking abroad, Janet Yellen, chair of the Federal Reserve, is due to testify on the Semiannual Monetary Policy Report before the House Financial Services Committee, in Washington DC on Wednesday. A more hawkish tone would be bullish for the dollar against the rand while a more dovish tone could strengthen the rand.

Other important economic announcements due this week include:

Monday

· China Foreign Direct Investment (FDI)

Tuesday

· China Consumer Price Index (CPI)

· Great Britain CPI

· EU Preliminary GDP

· US Producer Price Index (PPI) and Janet Yellen Speaks

Wednesday

· SA Retail Sales

· Great Britain Employment

· US CPI and Retail Sales

Thursday

· US Building Permits, Philadelphia Fed Manufacturing Index and Unemployment Claims

Friday

· Great Britain Retail Sales

· US Conference Board (CB) Leading Index

Giacomo Bonavera is head of foreign exchange trading at Capilis Asset Managers. Click here to visit the firm’s website.

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