Brent crude oil traded -0.19% lower last week at $56.65/bbl. Brent is now firmly above the $50/bbl mark and US oil drillers are keen to increase production. The American Petroleum Institute released estimates of a 14.2m barrel increase in US oil inventories last week, significantly above expectations of a 2.5m barrel increase. Gold had a volatile week. It closed trading at $1 231/ounce (+1.09%) as cash flowed into safe haven assets. In Australia, interest rates were kept on hold. The Reserve Bank of Australia are optimistic about the outlook for the global economy. They expect a positive spill over into the Australian domestic economy.

Philadelphia Fed President Patrick Harker mentioned that he believes the Fed could hike rates in March. The US 10y treasury rate closed the week at 2.42% (decrease of 3bps). In economic news, initial jobless claims came in at 234k for the week ended 04 February, below 246k from the week before.

In Europe, Sentix Eurozone confidence for February came in at 17.4pts. This was above what markets were anticipating (16.8pts) but below the January figure of 18.2pts.

However, although the reading is off the January highs, the index is at its highest range since August 2015 and sets a good start to 2017. The IFO Eurozone business climate index for Q1 2017 increased to 17.2pts from 8.2pts in Q4 2016 and indicates that the economic recovery is gaining impetus.

The MSCI World index closed the week 0.51% up whilst the MSCI Emerging Markets index rose 1.23%. The VIX, which is a measure of market volatility, closed around its lowest levels over the last 5 years at 10.85.

The meeting between US President Donald Trump and Chinese President Xi Jinping went well. GLOBAL MARKETS APPEAR TO BE TAKING A BULLISH VIEW ON THE US FOREIGN POLICY.


The main focus last week was on the State of the Nations Address (SONA). In the run up to the SONA on Thursday, market anxiety was heightened in anticipation of a potentially unfavourable cabinet reshuffle. In the event, there was no mention of a cabinet reshuffle by President Jacob Zuma. The rhetoric focused on economic transformation, further state intervention (especially in government procurement) and increased regulation on concentrated sectors. The rand traded at 13.37/US (depreciation of 0.53%), with heightened volatility. The 10y South African Treasury bond traded at 8.76% (decrease of 5bps).

The SACCI business confidence index reached its highest level in January since October 2015. The January index figure increased to 97.7 pts from 93.8pts in December, with 10 of the 13 sub-indices increasing.

Statistics SA released mining production data for December. Market consensus was for mining production output to have increased from-4.2% y/y in November to -3.8% y/y in December.

Markets were pleasantly surprised when the actual figure came in at -1.9%. The Platinum Group Metals (PGM) were the largest detractor, whilst manganese and iron ore both made positive contributions in December.

Manufacturing production moved into negative territory in December when it came in at -2.0% y/y from 2.0% y/y in November. The decline was due to less production of food and beverage products (-6.2% y/y) as well as petroleum and plastic products (-2.3% y/y). Manufacturing is therefore likely to detract from Q4 2016 GDP growth.

The National Economic Development and Labour Council (NEDLAC) announced that they have come to an agreement for the minimum wage. The agreement for minimum wage is R20 per hour instead of the R3500 per month as previously reported.

The JSE All Share Index traded 0.81% higher. The financial board contributed the most rising 2.06% whilst the JSE Small cap index closed 1.28%up.