In the markets: What to watch this week

The market gets a slow start this week as the global growth engine idles during one of its Golden Week holidays and Germany celebrates its unification with a public holiday.

In South Africa, however, the market will digest fresh Purchasing Managers’ Index (PMI) figures today. 

Last month the Bureau for Economic Research reported that the seasonally adjusted Barclays PMI for South Africa stood at 46.3 in August of 2016, falling from 52.5 in the previous month. It is the lowest reading since January, driven by a steep fall in the new sales orders and a second straight monthly decline in the business activity. 

PMI is measured between 0 and 100. A figure of 50.0 is the watershed between growth and decline where a number greater than 50.0 indicates growth and smaller than 50.0 indicates decline.

Forecasts show that a figure around 50 is likely on Monday.

On Friday the South African Reserve Bank reports South African Foreign Exchange Reserves. Foreign exchange reserves in SA declined to $45.71bn in August from $46.16bn in July and slightly below expectations of $45.98bn. It is the smallest number since January, mainly due to a decline in the US dollar gold price and foreign exchange payments made on behalf of the government.

Foreign influences on our market this week will be from the important private ADP Non-Farm Payrolls (NFPs) and the government NFPs. 

The private payrolls figures to be released on Wednesday are designed to mimic the government NFPs that come out two days later.

This is vital economic data released shortly after the month ends. The combination of importance and earliness makes for hefty market impacts.

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

Maintaining maximum employment is a statutory requirement of the Federal Reserve Bank.

Other important economic announcements due this week include:

Monday

• US ISM Manufacturing PMI

Tuesday

• JP Consumer Confidence
• GB Construction PMI

Wednesday

• SA Standard Bank PMI
• US Balance of Trade and ISM Non Manufacturing PMI

Thursday

• US Initial Jobless Claims

Friday

• GB Balance of Trade

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