In the markets: What to watch this week

The slew of GDP data from around the world was below expectations last week. Now market watchers are looking ahead to tomorrow for the local economic growth rate release.

In the US, GDP grew at a rate of 1.9%, compared to consensus expectation of 2.1%. The only notable outperformer was India, which grew at an outstanding 7% compared to the expected 6.4%.

SA’s GDP growth rate on a yearly basis until the end of September 2016 stood pat with end- June growth at 0.7%, which was the second straight quarter of growth after a 0.1% contraction in the first quarter of 2016.

An increase in activity in the finance, transport & communication, real estate and construction sectors was offset by a decline in the agriculture, mining and manufacturing industries.

Statistical forecasts for the local GDP growth rate for the fourth quarter, which is to be released tomorrow, show that a figure of 0.4% is expected.

Business confidence, an index largely viewed as a leading indicator as it includes commentary on the current state of the economy relative to backdated data, will be released on Wednesday.

Business Confidence Index declined to 38 in the fourth quarter of 2016 from 42 in the previous period as confidence dropped in motor and retail trade sectors and to a lesser extent in wholesale trade while confidence among manufacturers remained unchanged at depressed levels and it improved in the building sector. The results point to subdued growth in the second half of the year.

In other parts of the world and of high importance to the South African economy are the Non-Farm Payrolls figures in the US and the European Central Bank (ECB) interest rate decision.

In January, US job gains in the private sector moved to their highest levels in seven months to 246000. 180000 new jobs are expected to have been created in February.

The ECB’s rhetoric will remain dovish in coming months, focusing on the headwinds that the economy faces in 2017, and specifically the need for policy to remain accommodative in the face of political uncertainty.

Other important economic announcements this week:

Monday

• US Factory Orders and Fed Member Speaks

Tuesday

• SA Foreign Exchange Reserves
• Euro Area GDP Growth Rate
• US Trade Balance

Wednesday

• China Trade Balance
• UK Annual Budget Release
• US Crude Oil Inventories

Thursday

• China Consumer Price Index (CPI)
• US Unemployment Change

Friday

• Germany Trade Balance
• UK Manufacturing Production
• US Unemployment Rate

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

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