Economic Trends To Watch In 2017
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US: Our longer term view remains a strong dollar although short term momentum indicates the softening in the dollar index to persist a little longer given an easing in rate hike expectations relative to an overly optimistic ‘3 hikes in 2017 stance’. We see a possible 1 hike in Q3 2017 should growth dynamics persist. On the back of this, we see a stronger dollar into the end of 2017.
EU: The weaker November data is counterbalanced by strong previous data and as such does not change a reasonably resilient picture for the German economy. Our view is that geopolitical risks in Europe remain the main flashpoint in the near term. Monetary policy will likely remain accommodative through 2017. We maintain a LT bearish view on the euro. Generalised improvement suggests that while monetary stimulus will remain accommodative, that new stimulus will not be considered unless the outlook deteriorates. Current data points to a good Q4. As per above, our view is that geopolitical risks in Europe remain the main flashpoint in the near term. Monetary policy will likely remain accommodative through 2017. We maintain a LT bearish view on the euro.
CHINA: China has been reducing its gold and FX reserves (mostly dollar denominated) over the past year in order to defend the Yuan from further weakness. The PBOC is unlikely to change its policy, however rising inflation and marginally better economic growth may provide some breathing room for policy normalisation over the medium to longer term. For now, loose monetary policy will likely persist.
Currencies
The local session saw the Rand start the day trading in the mid 13.60’s. As it was NFP Friday, we saw very little actual trading take place ahead of the data announcement. Corporates remained quiet and liquidity remained thin. The Rand played between 13.6000 and 13.7000 for majority of the session. Post the release of the jobs data which missed expectations, the market was fairly unchanged and showed no conviction of any further interesting moves ahead of the weekend. The Rand market closed the day at 13.6725. New York saw the Rand trade marginally weaker between 13.6500 and 13.7600. This morning it opens at 13.7800.
The Rand remains very sensitive to economic data releases, and until we have clear indications of the health of the US economy and the possibilities of further interest rates hikes, mixed with political announcements locally, one still favours a firmer Rand in the shorter term. On the data front we have EZ unemployment rate. Possible trading range: 13.6000-13.9000
SA Equities
The All Share index started the trading day in positive territory on Friday morning and continued to rally throughout the day ending around its session highs. It closed 1.47% higher with the property and life insurance sectors leading the upside advancing 1.27% and 1.06% respectively.
- Naspers was also amongst the top performers on the day advancing 4.90% making up 338 points of the 741 index point move on the All Share index.
- Sirius Real Estate announced that it had notarised the sale of its Rupert Mayer Str. business park in Munich for €85 million and has agreed to lease back and manage the asset for six years.
- Value traded at 5pm was around R12.5bn with the currency at R13.65 vs. the USD at the close.
Financial Data
Oil=$57.10 Gold=$1,172.63 Platinum=$968.20
R/$=13.79 R/€=14.43
R/£=16.84 $/€=1.05
JSE All Share=51,216.00 DJIA=19,963.80
FTSE 100=7,210.05
