GLOBAL MARKETS
DRAGHI KEEPS RATES ON HOLD IN EUROPE
News from Europe seemed to dominate global financial media this week, as many countries prepared to begin their summer holidays. Investors awaited the outcome of the latest ECB meeting to see if hawkish comments made in Sintra in June would be reiterated. In the end, cen-tral bank president Mario Draghi kept rates on hold and maintained the asset purchase target of EUR 60 billion. No expectations for the timing of a policy decision were set, but some analysts suspect an announcement may come in October after the committees are tasked in early September.
CPI CONFIRMED FLAT IN EUROPE, WEAKER THAN EXPECTED IN UK
Europe’s headline CPI for June was confirmed as flat MoM and 1.3% YoY, and core inflation was confirmed at 1.1% YoY, unrevised and up from 0.9% in May. In the UK, June’s headline CPI came in at 0.0% MoM, lower than the 0.2% expected, which pushed the annual rate down more than forecast to 2.6% YoY. Core CPI also fell to 2.4% YoY, returning to April’s print, after consensus was for no change. The fall was attributed to lower prices for clothing, recreation, food and alcohol.
EUROPE: EASING CREDIT, Q2 EARNINGS SEASON STARTS WEAKER
The Q2 ECB bank lending survey reported a net easing in credit standards for corporates as well as growing loan and CAPEX demand. Germany and the Nether-lands could see more easing in credit conditions, while Italian banks may see a net tightening. Corporate and consumer loan demand is expected to increase, but demand for mortgages may be slightly lower. Demand for fixed investment by corporates increased in the Euro area in the second quarter of 2017, particularly in Italy, Netherlands and Germany.
In terms of the Q2 earnings season, the quarter is off to a weak start. A recent study by Deutsche Bank noted that only around 20% of Stoxx 600 companies have reported so far, and only 47% of companies have beaten expected EPS. With the euro stronger by 4% during Q2, forex pressures are likely to hamper the Q2 beat ratio, and negatively impact full-year earnings expectations.
UK: BREXIT NEGOTIATIONS CONTINUE
UK newspaper The Guardian reported that the British cabinet will agree to the free movement of EU citizens for up to four years as part of a transitional deal. The article suggests that there is consensus in the cabinet for the deal, with the news likely to boost supporters of a softer Brexit.
US: MANUFACTURING SURVEY COMES IN LOWER THAN EXPECTED
The New York Fed’s empire manufacturing survey for July slipped 10 pts to 9.8, lower than the forecast of 15.0 pts, but remaining higher than the level seen in April and May.
JAPAN: BANK OF JAPAN KEEPS POLICY UNCHANGED
The Bank of Japan met this week, but there were no changes to policy. The policy balance rate was kept at -0.10% and 10y JGB yields will continue to be tar-geted at around 0.0%. The BoJ raised its assessment of the economy, but revised its inflation outlook lower. The BoJ’s 2% inflation target was again delayed, this time to around the 2019 fiscal year, from November 2016’s postponement to the 2018 fiscal year. Inflation forecasts for 2017 and 2018 were also revised lower.
DOMESTIC MARKETS
SURPRISE RATE CUT BRINGS SOME RELIEF
Making local headlines this week was the SARB’s surprise 25 bps cut in the repo, to 6.75%. Standard Bank analysts believe that even under fairly conservative assumptions, the SARB’s real repo rate will now be too high for at least the next 12 to 16 months, and that an affordable real repo rate is around 1.20%. A real repo rate that is too high is likely to boost rand strength – either because the current account compresses due to lower imports from weaker domestic demand, or because South Africa sees capital in-flows as foreigners are overcompensated. Even after the 25 bps cut and revised inflation forecasts (4.9% YoY in 2018 and 5.2% YoY in 2019), the SARB will still run an average real repo rate next year of 1.85%, which should support the rand.
JUNE’S CPI COMES IN LOWER THAN FORECAST
Statistics SA reported June’s CPI as coming in lower than expected at 5.1% YoY, down from 5.4% YoY in May. Core CPI remained unchanged at 4.8% YoY in June, reflecting a weaker exchange rate. Moderating inflation and revised inflation forecasts indicate that weak domestic demand continues, and may lead to further rate cuts later this year.
MAY RETAIL SALES EXCEED EXPECTATIONS
Retail sales for May came in better than anticipated at 1.7% YoY, from an upwardly revised 2.0% YoY in April. The Bloomberg consensus for May was a contraction of 0.3% YoY. Despite the positive data, weak economic fundamentals are likely to weigh on retail sales performance this year, and will result in lowering private consumption expenditure to the end of the year.
ESKOM RELEASES FINANCIAL RESULTS
Eskom’s financial results were released yesterday, which although not in themselves significant, are of interest due to the Minister of Finance’s 14-point “action plan” which outlined the need for relief. The results reflected increased revenue at the SOE, but showed declining profits and an alarming R3 billion worth of irregular expenditure.
POSSIBLE RESTRICTION OF MINING AND PERMITTING RIGHTS
Mineral Resources Minister Mosebenzi Zwane gazetted a proposal yesterday to limit the granting of new mining and permitting rights, as well as the transfer of mineral rights between companies. These proposals will not affect applications already in place, but will likely hamper growth in the mining sector if successful. The news follows the recent postpone-ment of the new Mining Charter, adding to uncertain-ty around the future performance of the sector.
Megan joined the Brenthurst Wealth team in March 2026 as an Administrative and Fiduciary Services Assistant at our Val de Vie Office in the Western Cape. Prior to joining Brenthurst, Megan gained three years of experience in the retail sector, where she developed management and client service skills.
I obtained my National Diploma in Financial Information Systems from the Cape Peninsula University of Technology in 1999 and have worked in the wealth management industry since January 2000. Over the years, I have gained extensive experience in various roles, including Portfolio Manager Assistant, Planner Assistant, and Paraplanner.
Esmarelda Isaacs-Andreas joined the Brenthurst Wealth Stellenbosch office in October 2025, taking on the dual role of Receptionist and Fiduciary Administrator.
I obtained my National Diploma in Financial Information Systems from the Cape Peninsula University of Technology in 1999 and have worked in the wealth management industry since January 2000. Over the years, I have gained extensive experience in various roles, including Portfolio Manager Assistant, Planner Assistant, and Paraplanner.
Ashley joined Brenthurst Wealth in January 2025 as Office Administrative Assistant and Receptionist for the Stellenbosch Office.
René Heystek joined Brenthurst Wealth in November 2023, as receptionist and administrative assistant in the newly established George/Garden Route office.
Michelle Heystek has built a career in the financial services over the last two decades, after obtaining her B.Com degree in Financial Management in 2005. Once she joined Brenthurst in 2006, she continued her academic journey, obtaining her Certificate in Wealth Management from INSETA in 2007, followed by a Postgraduate Diploma in Financial Planning from the University of the Free State. In 2008, she earned the Certified Financial Planner (CFP®) designation.
Anelle joined Brenthurst Wealth as a Receptionist and Administrative Assistant to Brian Butchart in the Cape Town office in December 2023. She has a wealth of knowledge from working as a liaison between Financial Advisers and clients at TMA and Absa Investment Management Services (Aims) since 1998. She obtained her B. com degree from the University of Port Elizabeth in 1997.
ADMITTED ATTORNEY | FINANCIAL PLANNER & HEAD OF BRENTHURST FOURWAYS
Sanet was appointed in April 2020, joining our Cape Town team as an Executive Administration Assistant to Renee Eagar. She has been in the financial services industry since 1990. Her previous experience includes positions at Sanlam, BJM and ABSA. She spent her last 12 years working at Alexander Forbes Private Client Wealth as a Senior Wealth Management Assistant. She has received numerous accolades over the years which include but not limited to, Alexander Forbes Client Service Excellence – Silver award in 2014,2015 and 2017. Sanet has also obtained her Certificate in Wealth Management (NQF 5) in 2012 and achieved “Best Student of the Year” from Moonstone.
Maria Smit is a Certified Financial Planner® with over 10 years of experience in the financial planning industry.
