Market commentary

The past week was mostly peaceful, as social tensions eased and the world slowly resumed its progress towards at least some form of normality, with the recent bout of risk-aversion taking a breather. Meanwhile, however, global politicians have slowly begun to resume their pre-pandemic activities.

Prime Minister Boris Johnson is well known for his tenacious temperament, and has made it clear on many occasions that he will not back down or bow down to the EU – even if that means a “no-deal” Brexit. And the time pressure Covid-19 has placed on the Brexit negotiations has not changed his stance.

Earlier this week, European Parliament President David Sassoli accused the UK of lacking any “enthusiasm” to reach an agreement even though time is rapidly running out. As concerns rise yet again over whether the EU and UK will be able to make a deal by the December deadline, it seems that the only thing the two nations currently agree on, is to disagree.



Confusion and contradictions also emerged from the White House this week, as trade advisor Peter Navarro walked back his previous comments that the trade agreement between the US and China was over. But while Navarro defended himself by saying that the media took his comments out of context, this did little to appease the Chinese government, as the Chinese foreign ministry accused Navarro of continuously lying, and of being untrustworthy.

The last thing the two nations need is for the Trump administration to stoke the ongoing conflict with inconsistent messaging. However, in politics, one can never be too sure what is really going on behind closed doors, and US President Trump is known for making controversial and often drastic manoeuvres in an attempt to outsmart the economic opposition.

Meanwhile, financial markets have been more stable following the recent switch in risk sentiment. But although the storm seems to have passed for the time being, one should never discount the pace at which peripheral risks can intensify and yet again send shockwaves through the markets. Current risks to keep an eye on include:

  • Ongoing US-Sino tensions
  • Brexit, and the potential fallout of a no-deal Brexit
  • The upcoming US elections

Turning our attention to key data from around the globe:


  • Services and manufacturing PMI improved to 46.7 and 49.7 points respectively in June
  • New home sales added 16.6% month-on-month in May
  • GDP for Q1 2020 contracted by 5% compared to the previous quarter
  • Durable goods orders gained 15.8% month-on-month in May
  • Initial jobless claims remained above expectations, but improved from previous levels to 1.48m


  • Prime loan rates remained steady at 3.85%


  • Manufacturing and services PMI both improved in June, reaching 46.9 and 47.3 points respectively


  • Manufacturing and services PMI for the UK also rose, coming in at 50.1 and 47 points for June



Locally, corruption scandals such as state capture and VBS bank looting have weighed heavily on the shoulders of a nation that is already facing the dual strains of high unemployment and poor economic growth. And while many had lost hope of ever seeing those implicated brought to justice, this week serves as a reminder that even though the wheels of justice turn slowly, they turn nonetheless.

The arrest of a number of participants in the VBS scandal (which National Director of Public Prosecutions advocate Shamila Batohi described as perhaps the biggest bank robbery in South African history), restored some faith in the prosecutorial system, and those close to the heist are slowly starting to feel the heat. Notably, EFF leader Julius Malema took to the stage pre-emptively to insist that he was not involved with the looting of the bank, nor with anyone implicated in the matter.  However, this did little to clear him of suspicion, as he and EFF deputy Floyd Shivambu have been linked to the scandal through various family members.

Then, on Wednesday, Finance Minister Tito Mboweni was once again tasked with allocating the finite resources at government’s disposal in a manner that will bring relief to the most vulnerable, contribute to economic recovery and meet government’s debt obligations.

In his address, Mboweni highlighted that South Africa, in line with the rest of the world, faces the worst economic decline since the Great Depression. Moreover, the country also faces a sovereign debt crisis should government not manage to contain its growing debt levels and associated debt-servicing fees. But while Mboweni clearly expressed his concerns, he also paid tribute to the nation for enduring one of the most challenging times faced by our young democracy.

The rand remained range bound, trading between R17.20-R17.50 for the week, even as Mboweni acknowledged the dismal state of the economy and state finances. The local currency remains largely reactive to global events and sentiment, with South African events merely being a cog in an enormous machine.

Additionally, the highly anticipated unemployment rate increased 1% from the fourth quarter of 2019 to reach 30.1% in the first quarter of 2020. However, this statistic only takes data up to mid-March into consideration, and doesn’t yet reflect the effect of the pandemic on the local employment market.

In keeping with global trends, the lack of demand caused by the ongoing pandemic saw local inflation decelerate to a 15-year low at 3% year-on-year in April. Retail sales for March beat expectations, adding 2.7% year-on-year, while PPI fell short at 1.2% year-on-year in April. 



With much of the Covid-19 related risks plateauing, markets will now seek a new catalyst to determine sentiment and the subsequent risk appetite to drive market direction. Locally, we will keep an eye on any additional easing of lockdown regulations, as well as the upcoming court proceedings brought against government by various economic stakeholders.

From a data perspective, we will watch for the following key releases:


  • EU consumer and services sentiment
  • Local trade balance


  • CN manufacturing and non-manufacturing PMI
  • UK GDP
  • EU CPI
  • Local GDP Q1


  • CN Caixin manufacturing PMI
  • EU manufacturing PMI
  • Local manufacturing PMI & vehicle sales
  • US manufacturing PMI & FOMC meeting minutes


  • EU unemployment rate & PPI
  • Local current account
  • US jobless claims, unemployment & payrolls


  • US Independence Day
  • CN Caixin services PMI
  • Local Standard Bank PMI and SACCI business confidence

The rand started the day trading at R17.15/$, R19.23/€ and R21.29/£.


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