The Week Ahead


The Week Ahead

Published Date: 2020-07-06 | Source: INCE|Community | Author: Chris Gilmour

The Week Ahead

Total nonfarm payroll employment rose by 4.8 million in Jun, and the unemployment rate declined to 11.1%, the U.S. Bureau of Labor Statistics reported last Thu. These improvements in the labour market reflected the continued resumption of economic activity that had been curtailed in Mar and Apr due to the coronavirus pandemic and efforts to contain it. In Jun, employment in leisure and hospitality rose sharply. Notable job gains also occurred in retail trade, education and health services, other services, manufacturing, and professional and business services. With four months to go until the US presidential election in early Nov, Democratic Party contender Joe Biden is leading incumbent president Donald Trump by 8 percentage points. Trump's rating has plummeted in recent weeks mainly due to his perceived mishandling of the coronavirus pandemic. And while equity markets would probably take a negative view of a Biden victory, polls this far out need to be viewed with a great deal of caution. A lot can happen in the next four months. The US equity markets took heart from the unemployment figures. The S&P 500 closed 4% up for the week at 3130.01 on Thu 2 Jul, in a shortened week ahead of US Independence Day on Jul 4. From its Feb 19 closing peak of 3 386.15, the index has now fallen 7.6%. It has risen by 39.9% from its Mar 23 closing low of 2 237.4.

Meanwhile the Chinese stock market as proxied by the CSI 300 has out-performed both its US and European peers during 2020. This index has risen by 4% year to date, compared with a fall of 3% in the S&P 500 and 12% in the Eurostoxx 600. This reflects growing confidence in the Chinese economy, with the Caixin/Markit PMI showing that the Chinese services sector rose at the fastest pace in 10 years in Jun. After a hesitant start following loosening of lockdown restrictions in China, consumer spending is now picking up rapidly. The UK began opening up its economy at a rapid pace on Jul 3, with pubs, restaurants, cinemas and all shops now open, albeit with appropriate social distancing restrictions. The 14-day quarantine period for travellers arriving in the UK has also been relaxed for approximately 60 countries with which the UK has formed so-called "air bridges". More countries are expected to join this list in the next few weeks.

The SA economy contracted by an annualised 2% in the first quarter, the first time since 2009 that a South African recession has lasted longer than two quarters. There have now been three successive quarters of negative economic growth, in Q3 2019, Q4 2019 and now in Q1 2020. The second quarter is, by common consent, likely to be a shocker in terms of the actual contraction, but the SA Reserve Bank (SARB) put some colour to this last week when it forecast a contraction of more than 30% in Q2 2020, when lockdown restrictions to curb the spread of the coronavirus shuttered almost all activity for five weeks. The annualised drop in GDP is forecast at 32.6% for the three months through Jun from the previous quarter. The SARB now forecasts that the contraction for calendar 2020 will be 7.2%, worse than the 6.1% recorded in 1931 at the height of the Great Depression. Unless the bounce-back in economic activity during the third and fourth quarters Is profound, even this horrific forecast may be too conservative. The JSE Alsi closed 1.6% up for the week at 54 522 on Fri 3 Jul. From its peak of 61 685 on 25 Jan 2018, the Alsi has now fallen by 11.6%. From its recent low point of 37 693 on Mar 19, the index has risen by 44.6%.

The Fragile Five + Russia
Country GDP Growth (%) Inflation (%) Unemployment (%) Interest Rates (%)
South Africa -0.1 4.1 30.1 9.43
Brazil -0.3 1.9 12.9 6.52
India 3.1 5.8 11.0 5.85
Indonesia 3.0 2.0 5.0 7.24
Turkey 4.5 12.6 13.2 11.84
Russia 1.6 3.0 6.1 6.06
Source: Trading Economics

JSE listed company results out this week;

  • 7 July 2020
    • Omnia Holdings

    Economic data releases this week;

    • 6 July 2020 2020
      • SACCI Business Confidence
    • 7 July 2020
      • Forex Reserves June, Consumer Confidence Q2
      • 9 July 2020 2020
        • Manufacturing Production May

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