The Week Ahead


The Week Ahead

Published Date: 2020-10-26 | Source: INCE|Community | Author: Chris Gilmour

The Week Ahead

Initial jobless claims in the US unexpectedly fell substantially last week to 787 000 against expectations of 875 000 and a revised 842 000 from the previous week. This is the second-lowest figure since Mar 14 this year, just before the massive spike in unemployment caused by the reaction to the pandemic. As good and as welcome as these figures are, it should be noted that they are still above the previous high in the pre-pandemic era of 695 000 established in Oct 1982.

Meanwhile, a bipartisan agreement on a new stimulus package seems as remote as ever with zero probability of one materialising before the Nov 3 election. US president Donald Trump and Democratic Party contender Joe Biden squared up against each other in the final TV debate in Nashville Tennessee last Thu.

This debate was far better controlled than the first one, though it also degenerated into something of a slanging match, with little if any real substance emerging. Trump managed to keep his cool however and resisted the urge to interrupt Biden, knowing that the microphone could be muted if he tried to. Opinions canvassed afterward suggested that Trump probably had the edge over Biden in this encounter, though it was marginal.

The percentage turnout in this election looks as if it will be higher than any election since 1908 but it is not clear in whose favour this will result. If Trump manages to overturn the very large lead that Biden is currently enjoying in the opinion polls, it will be an even greater surprise than that achieved by incumbent president Harry S. Truman who retained the presidency in 1948. Right up to election day, Truman trailed Republican contender Thomas E.

Dewey by over 4 percentage points yet managed to win the popular vote by a margin of 5% and won the electoral college contest by 303 votes to Dewey's 189. The S&P 500 closed 0.5% down for the week at 3 465.39 on Fri 23 Oct. From its Sep 2 peak of 3 580.84, the index has now fallen by 3.2%. It has risen by 54.9% from its Mar 23 closing low of 2 237.4.

Third-quarter GDP growth in China came in at 4.9% against a consensus of 5.2%. Nevertheless, it is still a strong figure and way ahead of any other large economy. How ironic that the country that unleashed the coronavirus on the world should have had the shortest exposure to its damaging effects. China is largely back to normal now while most of the rest of the world wrestles with fear, mistrust, unemployment, recession and/or depression, non-Covid health catastrophes, countless ruined lives and livelihoods, and a so-called "second wave" of the virus. The IMF currently forecasts that for 2020 as while the Chinese economy will expand by around 2%. This compares with estimates of around a 10% contraction in the UK and the US and Europe coming in with high single-digit contractions. China will likely be the only major economy to achieve the much-coveted "V-shaped recovery".

South African minister of finance Tito Mboweni presents his Medium Term Budget Policy Statement (MTBPS) on Wed 28 Oct. It will be a thankless task, attempting to give some direction to the country on how to take the finances forward from here. The reaction to the Covid19 pandemic has bankrupted the country and government debt/GDP is now at levels that were unthinkable even at the beginning of this year. Last Fri Oct 23 in a written reply to a member of the official opposition in the SA parliament, Mboweni made it clear that part of the $4.3 billion IMF loan (the Rapid Financing Instrument) could well be used to pay salaries for government employees. State-Owned enterprises minister Pravin Gordhan also let it be known that a scheme to procure R10 billion in funding from National Treasury to re-float SAA has the backing of the cabinet. These two issues will not sit well with rating agencies that currently have SA under their microscopes. If little or no attempts are made to rein in government expenditure in the MTBPS, then expect a very negative reaction from investors, rating agencies, and others and by extension, expect the rand to weaken. Conversely, if the minister demonstrates resolve to finally tackle the thorny issue of fiscal consolidation, expect the currency to strengthen. The JSE Alsi closed 0.5% up for the week at 55 340 on Fri 23 Oct. From its peak of 61 685 on 25 Jan 2018, the Alsi has now fallen by 10.3% and remains in correction territory. From its recent low point of 37 693 on Mar 19, the index has risen by 46.8%.

The Fragile Five + Russia
Country GDP Growth (%) Inflation (%) Unemployment (%) Interest Rates (%)
South Africa -17.1 3.1 30.1 9.29
Brazil -11.4 3.14 13.8 7.6
India -23.9 7.34 6.7 5.84
Indonesia -5.32 1.42 5.0 6.63
Turkey -9.9 11.75 13.4 13.55
Russia -8.0 3.7 6.3 5.99
Source: Trading Economics

JSE listed company results out this week;

  • 29 October 2020
    • Afrimat, MiX Telematics
    • 2 November 2020
      • Alphamin Resources

      Economic data releases this week;

      • 27 October 2020
        • SA Unemployment Q3
      • 28 October
        • Medium Term Budget Policy Statement, SA Inflation Rate September
      • 29 October
        • SA PSCE, M3, PPI September
        • 30 October
          • SA Trade Balance September

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