US fu­ture pol­icy fears weigh on mar­kets

The Star Early Edition - - PRICES - Dr Chris Harmse Chief econ­o­mist Re­bal­ance Fund Man­agers

DO­MES­TIC fi­nan­cial mar­kets moved weaker at the end of last week on fears of the ef­fects of fu­ture eco­nomic poli­cies by the Trump ad­min­is­tra­tion, as well as higher-than-ex­pected US in­ter­est rates.

Fears of a dif­fer­ent stance to­wards US – Africa trade re­la­tions un­der the Trump ad­min­is­tra­tion – also moved in­vestors to be cau­tious to­wards South African as­sets.

De­spite the bet­ter-than-ex­pected do­mes­tic re­tail sales growth of 3.5 per­cent in Novem­ber and the an­nual in­fla­tion rate of 6.4 per­cent, which was in line with ex­pec­ta­tions, fi­nan­cial as­sets could not keep its mo­men­tum of the pre­vi­ous two weeks.

Share prices on the JSE ended the week lower. The all share in­dex traded down by 263 points (0.5 per­cent) for the week. Fi­nan­cial shares moved down by 537 points (1.3 per­cent), while the in­dus­trial sec­tor lost 0.4 per­cent. The re­source 20 in­dex traded slightly higher by 0.2 per­cent. The prop­erty share in­dex lost 1.1 per­cent, and the R186 bond in­creased by 10 points or 1.15 per­cent.

Bet­ter-than-ex­pected US eco­nomic data through­out the week points to­wards sooner than later US in­ter­est rates hikes and there­fore a much stronger dol­lar.

Among the US data re­leased last week, the four-week av­er­age job­less claims came in the low­est in 43 years, with higher-than-ex­pected in­creases in US house prices.

US stocks moved weaker in re­ac­tion as in­vestors be­came more cau­tious and stayed on the side­line be­fore the Trump swear­ing in cer­e­mony later on Fri­day.

Trump’s prom­ises on tax and reg­u­la­tory re­forms and higher in­fra­struc­ture spend­ing con­trib­uted to a surge in share prices on Wall Street since his win­ning of the elec­tion.

The rand moved side­ways against the dol­lar last week in an­tic­i­pa­tion of the Trump speech. The cur­rency traded 4 cents (0.3 per­cent) stronger against the dol­lar at R13.52 at the close of the JSE on Fri­day.

Against the pound, the rand de­pre­ci­ated by 24c (0.7 per­cent) to R16.62 and by 6c (0.4 per­cent) against the euro at R14.42 for the week.

This week

In­vestor’s at­ten­tion will be on the Mon­e­tary Pol­icy Com­mit­tee’s in­ter­est rate de­ci­sion, as well as the re­lease of eco­nomic growth data of the US and the UK.

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