Gold opened the week trading at USD1316/ounce and ended at USD1257/ounce. The 4.42% fall was on the back of media reports surfacing that the ECB will start to taper their asset buying program sooner than the March 2017 closing date. Emerging market currencies traded mostly on the back foot as evidenced by the Chilean peso and Romanian leu closing the week at 667/USD (depreciation of 2.07%) and 4.04/USD (depreciation of 2.01%) respectively. Should the ECB start to cut back on their quantitative easing program, it would coincide with the Fed hiking rates (given their current hawkish rhetoric), which would be negative for emerging markets and could lead to a further depreciation of their currencies.

In the US, Cleveland Fed president Loretta Mester (who is a voting member of the board), said the US economy is currently ready for a rate hike and that the November Fed meeting should still be considered a “live” meeting even though there is no scheduled press briefing. Furthermore, US ISM manufacturing purchasing managers index (PMI) for September beat expectations of 50.4pts when it came in higher at 51.5pts. The change in the price index of US core personal consumption expenditure (PCE) in the meanwhile, which is the Fed’s preferred measure of inflation, was 1.7% y/y in August, up from 1.6% y/y in July, indicating that inflation has slowly been picking up in the US. Non-farm payrolls however, surprised on the downside at 156K vs expectations of 175K for September.

UK Prime Minister Theresa May said the UK would trigger Article 50 to leave the EU no later than March 2017, which put pressure on the pound sterling, which closed the week trading 3.8% lower at 1.24/USD and reaching lows last seen 31 years ago. Some of the pound’s weak-ness could also be owed to comments from French President Francois Hollande, when he said the EU should be tough in their Brexit negotiations with the UK. Despite all the uncertainty surrounding Brexit and the depreciating pound, UK manufacturing PMI for September came in at 55.4 pts, which was above expectations of 52.1 pts and up from 53.4 pts in August.

Chinese manufacturing PMI for September came in at 50.4pts, slightly below expectations of 50.5pts while Japanese manufacturing PMI for September came slightly above expectations, also at 50.4pts. This indicates that both countries are in expansionary territory (above the 50pt bench-mark level).

In the meanwhile, India’s central bank cut inter-est rates by 25bps to 6.25% owing to subdued inflation caused by the monsoon season. The MSCI World index fell -0.77% this week while the MSCI Emerging Markets index added 1.26%.


The IMF made news last week as they trimmed their 2017 GDP growth forecast for South Africa from 1.0% to 0.8%. Their 2016 GDP growth fore-cast however, remains unchanged at 0.1%. The decision to decrease the 2017 growth forecast was due to policy uncertainty and the impact of weaker terms of trade. The IMF added that future growth forecast depends on whether SA can improve efficiency and on the governance at State Owned Enterprises (SOE).

In economic news, the Barclays manufacturing PMI for September, released by the BER, rose by 3.2pts to 49.5pts. Falling production costs from subdued petrol and diesel prices and lower input costs due to the stronger rand were reasons for the higher number. The largest contributions came from an increase in business activity as well as from new sales orders, while negative contributions were owed to weak job creation. The number is unfortunately still below the 50-point mark in contractionary territory, which suggests a slowdown in q/q manufacturing production growth for Q3 2016 as consumers remain under pressure, evidenced by a slackening in demand conditions.

Thereafter, Naamsa released vehicle sales for September. Market consensus was for a contraction of -10% y/y but in the event, the actual number disappointed, coming in lower at -14% y/y equating to 7 904 less vehicles sold. Low growth, double-digit vehicle price increases, lower consumer and business confidence and a falling disposable income means that lower new vehicle sales could continue into the foreseeable future. Q2 2016 non-farm payrolls, released by Stats SA, came in at -0.7% q/q. This was lower than the Q1 2016 number of 0.0% q/q. Most job losses occurred in the community, social and personal services industry (-1.8% q/q) due to temporary jobs created during the election period.

The JSE All Share index shed -0.45% for the week. The industrial and the resource boards were the largest detractors, falling -1.07% and -0.42% respectively while the JSE Small Cap index rose 1.70% over the week.