GLOBAL MARKETS
TRUMP FAILS TO GET SUPPORT FOR NEW HEALTHCARE BILL

Markets kept an eye on the healthcare debate in the US this week, which climaxed in the withdrawal of the AHCA, Trump’s bill to replace Obamacare, on Friday. The new president struggled to gather sufficient support for the bill, and tried to force reticent Republicans to pass it by issuing an ultimatum. Just a few hours later, House Republicans withdrew the bill before the scheduled vote, still lacking the required support. Investors are concerned by the failure of the bill, seeing it as a proxy for the success of Trump’s upcoming tax reform plans.

US: ON TRACK FOR GDP GROWTH IN Q1

Besides the uncertainty created by the healthcare debate, US markets also suffered from stretched valuations, and bank stocks fell on lower bond yields. Industrial production for February showed no change, after analysts anticipated a +0.2% rise month-on-month (MoM). In contrast, manufacturing production met expectations, rising +0.5% MoM. Recent economic data have left the Atlanta Fed’s GDP tracker for the first quarter unaltered at 0.9%, though the New York Fed’s model still predicts a 2.8% growth rate.

UK: BREXIT NEGOTIATIONS CAN BEGIN

Making headlines in the UK this week was the terrorist attack outside Parliament on Wednesday. The FTSE 100 ended 0.73% lower that day, but the pound recovered initial losses to close relatively unchanged. In other news, PM Theresa May will trigger Article 50 on March 29th to officially begin Brexit negotiations, and headline CPI was higher than expected, rising +0.7% MoM in February.

EUROPE: ATTENTION TURNS TO ITALY

Although the political focus has been predominantly on the upcoming French elections, the anti-establishment 5-Star movement in Italy seems to be gaining support, according to recent polls. Most February polls indicated that the Democratic Party still has a marginal lead, but one poll puts the 5-Star 5.5% ahead of the Democrats.

CHINA: HOUSE PRICES CONTINUE TO RISE

China reported that 56 out of 70 major cities saw rising house prices for new homes (excluding subsidized housing). This is up from 45 cities in January. The municipal government of Beijing has tried to cool prices by raising the deposit on second homes by 10%, while reducing the max mortgage length from 30 to 25 yrs.

JAPAN: TRADE SURPLUS GROWS

Meanwhile in Japan, February’s exports were up +11.3% YoY (+10.1% expected), from +1.3% in January. Imports fell to +1.2% YoY from 8.5% YoY.

BOND MARKETS: ONE-OFF HIKE LOOMING

The pattern of the ECB’s easing decisions since the beginning of QE has led analysts to suspect that a one-off hike in the deposit facility rate is looming. Global bond yields were slightly lower this week, led by US bonds.

WORLD MARKETS DOWN FOR THE WEEK

Global equities fell this week, with the MSCI World index down -0.93%. The S&P 500 lost 1.42%, the FTSE 100 gave up 1.19%, and the Nikkei declined 1.33%. However, EM equities were up slightly, with the MSCI EM index rising 0.37%.

DOMESTIC MARKETS
SARB: CURRENT ACCOUNT DEFICIT DECLINES

On the local front, this week’s main news came from the SARB, who released the current account deficit (CAD) figures for the fourth quarter of 2016. The Bloomberg consensus expected a compression to -3.4% of GDP from -4.1% of GDP in the third quarter; however, data showed the CAD compressed to -1.7% of GDP in the fourth quarter of 2016. Looking at 2016 overall, the CAD compressed to -3.3% of GDP, compared to -4.4% of GDP the previous year.

CPI IN LINE WITH EXPECTATIONS

Another key release came from Stats SA, who announced the CPI for February as 6.3% YoY, with core CPI moderating to 5.2% YoY. These figures were in line with Bloomberg consensus. The slowing of inflation has been attributed to decelerating food and alcoholic beverage inflation, and to some extent various CPI constituents such as goods and services.

RAND CONTINUES TO STRENGTHEN

At close of trade on Friday, the rand was trading 2.31% stronger for the week at R12.33 to the US dollar. EM currencies have benefitted from weakness in the trade-weighted dollar following the US rate hike last week, and the rand is now decisively below 12.80.

INCREASE IN FIXED-RATE BOND COMPETITIVE AUCTION LEVELS

On Friday afternoon, the National Treasury announced an increase in the weekly fixed-rate competitive bond auction levels from R2,350 mil-lion to R2,650 million, as indicated in the 2017 Budget Review. The increase will take effect from 4th April 2017.

HARMONY STRIKE BEGINS AND ENDS

Another mining strike disrupted production this week, though it only lasted a day before successful negotiations returned the situation to normal. Harmony Gold Mining Company re-ported an illegal strike on Thursday at its Kusasalethu mine, as employees reacted to the suspension of the Association of Mineworkers and Construction Union’s (AMCU) branch leadership. The leadership had been suspended after inciting a go-slow at the mine, in response to disciplinary procedures against 40 employees after an illegal sit-in at the mine.

JSE ENDS WEEK LOWER

The JSE All Share index fell -1.19% this week. Resources declined the most, giving up -3.71%, while industrials retreated -0.31%, and financials lost -0.78%.

NEWSFLASH:
PRESIDENCY CONFIRMS ZUMA INSTRUCTS GORDHAN TO RETURN FROM LONDON

On Monday 27 March, it was announced that President Jacob Zuma ‘instructed’ Finance Minister, Pravin Gordhan, to return to SA immediately and not go ahead with his scheduled roadshow to boost confidence amongst international investors. The local market reacted swiftly and within minutes after the news broke the value of the rand declined with more than 30c against the dollar. This is an unfolding story and we will report the outcome in our weekly report of next week as well as our monthly market report to be published in early April.