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.

Stock markets took a bit of a knock last week as the South African Top40 continued to fall from 53 161 in January to 49 207, roughly 7.5%, while the rand weakened against the dollar as it could not maintain momentum below R13.00/$ as it formed a head-and-shoulder pattern between 12.80 and 13.10.

The range-bound nature of the markets has led many investors to look for short-term long-short investment strategies in an effort to adapt to the fast-changing climate that investors have to deal with, which makes sense.

Mining production in South Africa decreased by 1.9% year-on-year in December of 2016 but it was better than market expectations of a 3.8% decrease. Output for gold and diamonds fell 7.1% and 7.8% respectively while iron ore, copper and coal grew by 7.6%, 21.1% and 0.1% equally.

On a monthly basis, manufacturing production in SA advanced by 0.3%, matching the previous month’s figure. Considering the three months to December, it shrank 1.1%. In 2016, manufacturing production rose 0.8% mainly due to the growth of petroleum, chemical products, rubber and plastic products at 3.9% and wood & wood products, paper, publishing & printing growing by 3.3%.

The latest mining and manufacturing data will be released tomorrow.

Wednesday has another two important pieces of data which many will want to look out for, in the form of business confidence and retail sales

Business Confidence in South Africa averaged 44.88 from 1975 until 2016 and in January it was recorded at 38.

Retail sales in the country grew 0.9% year-on-year in December and reached an all-time high of 15.50% in September 2006 while it recorded an all-time low of -6.20% in April 2009.

Elsewhere in the world, Wall Street’s top banks were unanimous in their view that the Federal Reserve will increase interest rates at its policy meeting on Wednesday following a stronger-than-forecast February US payrolls report while the Bank of England is expected to keep monetary policy pat as consumer spending starts to feel the pinch of Brexit.

Market watchers will also be keeping a keen eye on the Dutch elections, viewed as the initial sentiment indicator between centre-right and centre-left political parties in Europe, ahead of the upcoming French and German elections.

Other important economic indicators this week:

Monday

• European Central Bank president speaks

Tuesday

• Chinese Industrial Production
• German ZEW Economic Sentiment Index
• US Producer Price Index

Wednesday

• UK Unemployment
• US Consumer Price Index and Retail Sales

Thursday

• Bank of Japan Monetary Policy Decision
• US Building Permits, Manufacturing Index and Unemployment Claims

Friday

• US Preliminary Consumer Sentiment

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

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