GLOBAL MARKETS
TRUMP MAKES PROGRESS WITH TAX REFORM

This week, investors awaited the Kansas Fed’s annual economic symposium held at Wyoming, where central bankers met to discuss long-term policy issues of mutual concern. However, Friday’s speeches from Janet Yellen and Mario Draghi were a bit of an anti-climax, with Draghi apparently unconcerned about the recent appreciation in the Euro, and Yellen warning about dismantling some of the post-crisis financial regulation.

US: PROGRESS ON TRUMP’S TAX REFORM
President Trump seemed to make some progress on his tax reform agenda this week, with his team finding common ground on some of the ways to pay for personal and corporate tax cuts, such as capping mortgage interest deduction for home owners, scrapping state and local tax deductions, and eliminating businesses’ ability to deduct interest while allowing the phase-in of full expensing for small businesses. However, Trump managed to squash some of the optimism that resulted, after threatening to shut down government if Congress did not fund the border wall he promised voters while campaigning. In other news, the federal government has until sometime between late-September and mid-October to raise the debt ceiling or else face a technical default. Key officials appear confident that the debt ceiling will be raised without a hitch, as the US believes in paying its debts. August manufacturing PMI came in lower at 52.5 pts (vs. 53.5 pts expected), while the services PMI rose 2.2 pts to 56.9 pts (vs. 55.0 pts expected), the highest level since April 2015.

EUROPE: FLASH PMI REMAINS STABLE
The Euro-area flash PMI remained mostly unchanged as gains in manufacturing offset a small drop in services. The composite PMI edged up slightly to 55.8 pts, implying that the economy is growing at an annual rate of 2.5% YoY. Despite recent appreciation of the euro, input prices were higher and not falling as some have suggested.

GERMANY: ECONOMY SET TO CONTINUE ROBUST GROWTH
In Germany, the ZEW expectations index was lower than forecast at 10 pts vs. 15.0 pts, on worries that the strengthening euro will put the economy under added strain after the widening diesel car scandal. The manufacturing PMI returned to 59.4 pts (vs. 57.6 pts expected), while the services PMI recovered slightly to 53.4 pts (vs. 53.3 pts expected), bringing the composite PMI to 55.7 pts. The figures indicate that the German economy should continue to grow at a solid pace in the upcoming quarters, but at the same time reveal growing capacity pressures and increasing risk of overheating.

UK: AUGUST DATA SHOWS SALES DECLINE
The UK’s preliminary GDP data for the second quarter came in as expected, at 0.3% QoQ and 1.7% YoY. Private consumption rose 0.1% QoQ (vs. 0.3% expected), but capex rose more than forecast to 0.7% QoQ. On the consumer side, the UK’s CBI Distributive Trades Survey revealed a net 10% of respondents reporting a decline in YoY sales in August.

INDONESIA: UNEXPECTED RATE CUT
Indonesia’s central bank unexpectedly cut the reverse repo rate by 25 bps to 4.50% this week, to boost economic growth and the country’s banking sector. The move was motivated by the fact that inflation has fallen to its lowest level since the current measuring system was in place last month, which gave the bank more leeway to cut.

DOMESTIC MARKETS
JSE AND CURRENCY END WEEK IN POSITIVE TERRITORY

It was a very quiet week for local markets. By Friday, the JSE had risen 2.53%, with 2.95% gains in resource shares boosting the index. The rand had strengthened by 1.03% to the US dollar by the end of the week, closing at R13.04 to the greenback. The MSCI global index climbed 0.73%, while the MSCI EM index gained 2.44% for the week.

SARB’S LEADING INDICATOR LOWER FOR JUNE
The SARB’s leading indicator for June came in slightly lower than anticipated, at 95.7 pts (vs. 95.8 pts in the previous two months). The main positive contribution to the index was attributable to an increase in South Africa’s major trading partners and an increase in new orders by manufacturers. The main negative contributions came from a drop in the number of building plans passed and a decrease in job advertisement space.

CPI FOR JULY LOWEST SINCE SEPTEMBER 2015
Headline CPI for July came in at 4.6% YoY, its lowest since September 2015, and down from 5.1% YoY in June. This means that the chances of further interest rate cuts are likely, in an effort to boost flailing economic growth. On average, prices increased by 0.3% between June 2017 and July 2017.

ESKOM: HIGHER ELECTRICITY TARIFFS ARE ON THEIR WAY
After a Constitutional Court judgement, Eskom may now claw back additional costs from the previous four years in the form of higher tariffs – over and above a NERSA approved tariff. This is likely to have a serious impact on both consumers and producers. Electricity currently makes up 3.75% of the overall CPI basket, but if Eskom is granted the full 20% application and additional clawbacks for four years, electricity tariffs will push CPI higher in July next year.