Weekly market brief - 16 May 2019

Trade places with Ramaphosa?

A senior Moody’s sovereign analyst has mentioned that Turkey needs to put a comprehensive and credible economic plan in place if it is to avoid another cut to sovereign credit rating.
The US have now imposed severe sanctions on Chinese telecoms giant Huawei, further escalating the trade war. Huawei will now be banned from acquiring components and technology from US companies without government approval and thus banned from selling equipment in the US. It has been put on black list that could prevent it from doing any business whatsoever with US companies. This move will likely delay any trade agreement and dampen global economic growth as well as other market currencies.
The rand has been trading in a fairly narrow range between R14.19 and R14.30 this week with further appreciation to R14.13 seen today.
If we sustain the break below R14.17 for a few days, we can expect to move into the R13.80s territory.
Key local political events to keep in mind include the following:
* 13th - 15th May – Allocation of parliamentary seats
* 25th of May – Inauguration of President Cyril Ramaphosa
* 26th or 27th May – Ramaphosa announces his cabinet
* Sometime in June – State of the Nation Address

Unemployment rate rose to 27.6% in Q1.19 from 27.1% in Q4.18 following the country’s persistent lack of growth.
There were 6.2 million people without jobs in the three months to the end of March, compared with 6.1 million people in the prior quarter.
Retail sales rose 0.2% y/y in March after rising by a revised 1.4% in February.

There are overwhelming global economic growth concerns, which has also been reflected locally by the increased rate of unemployment, and the global trend has been dovish.
The FRA curve shows the market not to be pricing in rate hikes this year.
For now, expectations are for interest rates to remain flat for the remainder of the year.

US import prices rose 0.2% m/m in April, continuing the upward trend started in January, the US Bureau of Labor Statistics reported on Tuesday. This was however below the increases of 1.0% and 0.6% in February and March respectively and declined by 0.2% y/y. The April increase was driven by higher fuel prices.
US Industrial production contracted by 0.5% y/y in April, which was worse than consensus for no growth and also down from 0.2% growth in March.
US Retail sales contracted by 0.2% m/m, below the forecast +0.3% and down from a 1.7% surge in March.
Initial claims for US state unemployment benefits dropped 10 000 to a seasonally adjusted 212 000 for the week ended May 11, the Labor Department said on Thursday.
Euro Consumer prices rose 2.0% y/y in April, considerably higher than the increase of 1.3% y/y in March.
UK unemployment growth slowed to 99 000, well below a forecast of 135 000.
China retail sales rose 7.2% y/y in April, the slowest pace since May 2003, data from the National Bureau of Statistic showed on Wednesday. This was down from 8.7% in March and also below forecasts for 8.6%.

Gold rose above $1 300/oz earlier this week on safe haven demand after China announced that it will retaliate over tariffs imposed by the Trump administration.
The precious metal fell to $1 292.45/oz on Wednesday as optimism surrounding US China trade talks soothed investor concerns.

3m copper fell to $6 007.50/t at the beginning of the week after China said it planned to boost import tariffs against $60bn worth of US goods.
The base metal recovered to $6 094/t on Wednesday after US President Donald Trump insisted that trade talks with China had not collapsed.

Brent rose $72.32/bbl on Thursday as concerns of supply disruptions amid heightened tensions in the Middle East overshadowed an unexpected rise in US inventories.
US crude inventories rose unexpectedly last week to their highest since September 2017, increasing by 5.4 million barrels and surprising analysts, who had expected a decrease of 800 000 barrels.