In the markets: What to watch this week

As many investors return to the markets this week and market liquidity goes back to normal, money managers will have been rebalancing their books, making predictions for what will likely be a very interesting 2017.

Mining and resource stocks are in the limelight and it is not necessarily because of a proportional increase in demand for commodities but more because of the low cost of the stocks after their three-year-long battering.

Some argue that most of the moves in the mining and resource space already took place last year while others see a dip in the share prices as an opportunity to buy.

Financial shares are also likely to grind along in an upward direction as the rand strengthens while industrials could underperform as a result of the currency.

Unpacking that further, pharmaceuticals are looking promising while Naspers’s* holding in Tencent is likely to continue to be a “bull-hemoth”.

With a large part of negative political tension priced into the rand and an aversion of a downgrade to junk-status credit rating last year, the local currency is likely to strengthen for the most part of the year.

However, credit rating reports are an annual phenomenon and, should political tensions boil over, growth cool off and the current account widen, weakness could change the direction the rand will take.

America’s trajectory is likely to have a big impact on our local economy.

With the effect of “Trumponomics”, economists are positive on the forecasts of the American growth rate and job creation. 

Trumponomics is likely to create higher interest rates and higher inflation. The first Federal Open Market Committee statement will be made on 1 February and interest rate forward guidance will be closely watched after the Fed hiked rates for the first time in a year in December 2016.

Other important economic announcements this week include:

Monday

• SA Foreign Exchange Reserves and Total New Vehicle Sales

Tuesday

• CN CPI

Wednesday

• GB Manufacturing Production and Balance of Trade
• US Crude Oil Inventories

Thursday

• SA Manufacturing Production
• DE GDP Growth Rate and Government Budget
• EA ECB Monetary Policy Meeting Accounts
• US Unemployment Claims

Friday

• SA Barclays Manufacturing PMI
• US Fed Chair Yellen Speaks, Retail Sales, PPI and Prelim UoM Consumer Sentiment
• CN Trade Balance

*finweek is a publication of Media24, a subsidiary of Naspers.

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