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In the markets: What to watch this week

The balance of SA’s economic harmony

The lead-up to the Jackson Hole Symposium in Wyoming left markets skittish until the Yellen finally spoke.

The dollar strengthened against the rand as investor expectations of the probability of a rate hike reflected in the Federal Funds Future Rates, while the “Sars wars” continue to threaten foreign flows of capital.

Signs of a change in trend for South African consumers, who are constrained by high inflation and high interest rates, is hopeful for economic activity.

Private sector credit data due on Wednesday will be focused on indications of whether the private sector had more money for consumption in July.

Forward guidance of an interest rate hike cycle in the January Monetary Policy Committee’s (MPC’s) statement, provided by Reserve Bank governor Lesetja Kganyago, constrained private lending at the beginning of the year.

In June there was an improvement in lending growth as the economic headwinds ebbed to a breeze, evident through the cooling inflation and strength of the local currency.

On the other side of economic harmony, July trade balance data, also due on Wednesday, should continue to show improvements even as the rand strengthened 5.8% for the same month.

The weak currency helps improve the competitiveness of our exports as local goods become relatively less expensive for offshore buying in foreign currencies.

The equation of economic harmony can stabilise through strong industrial growth.

The Manufacturing Purchasing Managers Index (PMI) provides a leading indication of business conditions in the manufacturing sector, and a report is due to be released by Barclays on Wednesday. A figure above 50 indicates expansion in manufacturing while a figure below indicates contraction.

A follow up, and possible confirmation, of Wednesday’s figure is due on Monday and will be released by Standard Bank.

Employment and jobs in the US

Elsewhere in the world, the US releases its monthly ADP Non-Farm employment change on Wednesday. ADP provides payroll services to US corporations, and they analyse data from around 400 000 customers to derive employment growth estimations.

On Friday, Average Hourly Earnings gets released and is the earliest data related to labour inflation, indicating employment demand.

Job creation is an important leading indicator of consumer spending, which accounts for a majority of overall economic activity.

Other important economic announcements due this week include:

Monday

  • Great Britain public holiday
  • US Personal Income and Spending, US PCE Price Index and Dallas Fed Manufacturing Index

Tuesday

  • Japan Unemployment Rate
  • China KOF Leading Indicators
  • Great Britain Mortgage Approvals and Lending and BoE Consumer Credit
  • Euro area Business Confidence and Industrial Sentiment
  • German Inflation Rate
  • US S&P/Case-Shiller Home Price and CB Consumer Confidence

Wednesday

  • SA M3 Money Supply
  • Great Britain Consumer Confidence
  • German Unemployment Rate
  • Euro area Unemployment Rate

Thursday

  • SA Total New Vehicles Sales
  • China NBS Manufacturing PMI, Non-Manufacturing PMI and Caixin Manufacturing PMI
  • Euro area Markit Manufacturing PMI
  • Great Britain Markit/CIPS Manufacturing PMI
  • US Markit Manufacturing PMI, ISM Manufacturing PMI and Construction Spending

Friday

  • Japan Consumer Confidence
  • US Balance of Trade

Giacomo Bonavera is head of foreign exchange trading at Capilis Asset Managers. Click here to visit the firm’s website.

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