The Week Ahead

  • South Africa dodges a bullet from Moody’s

    The very strong bounce in the S&P 500 during the first quarter of 2019 has resulted in the strongest Mar quarter since 1998. After flirting with a bear market in late 2018, the S&P 500 is now only 3.3% below its all time high of 2931 in Sep 2018. Opinions remain highly divided on the likely direction of the US equity market, as especially as investors are now putting their funds back into the bond market again. Next week will see the first quarter earnings from US companies and it will be instructive to see how these have held up.  

    Moody’s ratings agency was scheduled to deliver its rating of South Africa’s sovereign debt last Fri Mar 29. Most observers were expecting at best a reduction in outlook from stable to negative, with a few outliers expecting a full downgrade to sub-investment grade for SA’s local currency debt. In the event, Moody’s didn’t deliver a decision after all and is obviously waiting until after the May 8 elections before making its decision. This gives SA a welcome breathing space-perhaps of up to six months-during which time the government must formulate a credible growth plan.

    The Brexit saga in Britain continues, with the original deadline of 29 Mar having now passed with the UK still a member of the European Union (EU). On Fri Mar 29, embattled British PM Theresa May managed to wangle another vote on her Withdrawal Agreement (WA) by decoupling it from the Political Declaration and thus making it appear as if it was a new motion. Although speaker of the House of Commons (HoC) John Bercow allowed this cunning move, it was made clear that another vote on the same WA would be unlikely to be allowed. The HoC will be holding a series of indicative votes next week, in an attempt to find an alternative solution to the Brexit gridlock. But time is of the essence, as the new deadline for leaving the EU is now Apr 12. The GBP weakened on Fri as it became clear that May’s deal would not be voted through the HoC and may well remain weak if the most likely outcome is for the UK to “crash out” of the EU without a deal.  The EU said in a statement on Fri that a no-deal Brexit was its most likely outcome, there may well be a bit of gamesmanship in this statement.

    The JSE All Share Index (Alsi) closed on Fri at 56464, 0.6% up on the week. Much of this improvement in the Alsi was due to the Naspers share price reaching a 7-month high one news that it will list its internet operations on Euronext Amsterdam.

    Economic related events this week;

    1 Apr                                 NAAMSA new vehicle sales Mar, Absa Manufacturing PMI Mar, UK Parliament indicative votes on Brexit

    3 Apr                                 Standard Bank PMI Mar

    5 Apr                                 US Nonfarm payrolls Mar