The Week Ahead


The Week Ahead

Published Date: 2021-01-18 | Source: INCE|Community | Author: Chris Gilmour

The Week Ahead

US unemployment claims rose last week to 965 000, the most since late Aug. Claims spiked to nearly 7 million last spring after nationwide shutdowns took effect and declined over the summer but have been stuck above 700,000 since Sep. The high pace of layoffs coincides with an economy that has faltered as consumers have avoided traveling, shopping and eating out in the face of soaring viral caseloads. More than 4,300 deaths were reported last Tue, another record high. As outgoing US President Donald Trump's impeachment process goes to a trial in the US Senate, President-Elect Joe Biden announced a wide-ranging set of federal stimuli to be put to the US Congress for approval. Biden also announced plans for mass vaccination of the US population to combat the damaging effect of the Sars-Cov-2 virus, which has killed almost 400 000 Americans since the pandemic first struck the US in March last year. Trump's impeachment trial in the US Senate will revolve around his alleged incitement of a mob that stormed the Capitol last week-the home of the US Congress-and trashed parts of it. A 2/3 majority of sitting senators will be required to convict Trump, which means 17 Republicans will need to cross the Senate floor to achieve that majority. If convicted as a former president, the Senate will have the power to bar Trump from ever running for president again. Last week, President-Elect Joe Biden unveiled his $1.9 trillion stimulus package that includes an additional $1 400 cheque on top of the already announced $600 to people earning $75 000 or less per year. That element will cost $1 trillion. A further $415 billion will be used to fight the virus and $400 billion has been earmarked for small businesses This is a large package and if passed will be warmly received by the equity markets. The US equity market is expensive and needs to be fed a continuous stream of good news to stay at these levels or keep on rising. Even if Biden manages to vaccinate 100 million people in 100 days, it still leaves a lot more to be processed before the virus is beaten. However, by then there should be tangible signs that the death rate is slowing. At that point, ordinary Americans will start spending again. But this may not occur until the 3rd or 4th quarters of this year, so the US equity market may well stay elevated at least until then. The S&P 500 closed 1.5% down for the week at 3 768.25 on Fri 15 Jan. It has risen by 68.4% from its Mar 23 closing low of 2 237.4.

The UK's GDP contracted by 2.6% month on month in Nov, driven by a drop in the services sector output reflecting a month-long lockdown in England and tight restrictions in the rest of the country. Industrial production was little changed in the month (-0.1% month on month) with the construction sector posting growth (+1.9%) with both sectors largely continuing operations through lockdowns. The economy finished Nov nearly 9% smaller compared to the same time last year, expanding the contraction from -6.8% in Oct, with the hospitality sector being more than 60% smaller and the entertainment industry nearly 40% lower. In an attempt to help contain the rapidly-expanding virus, Britain has banned all travel corridors from Mon 18 Jan. All travellers entering the UK, regardless of point of origin, will be required to show a recent (72 hours prior to travel) negative pcr test and will also have to self-quarantine for 10 days.

SAB, the South African subsidiary of brewing giant AB Inbev has cancelled another R2.5 billion of planned investment in SA, following the National Coronavirus Command Council's banning of alcohol sales and distribution for the third time. This is in addition to the R2.5 billion already cancelled in Aug last year, giving R5 billion in total. Heineken has also announced that it is shelving plans to construct a brewery in KZN that would have created 400 new jobs. In a chilling interview with Eye Witness News last week, President Cyril Ramaphosa admitted there was no money left to help poor families cope with the economic impact of Covid-19. The SARB's Monetary Policy Committee will convene next week to decide on the repo rate. Expect no change in the current rate. The JSE All Share Index (Alsi) closed 0.05% up at 63 550 on Fri 15 Jan. From its recent low point of 37 693 on Mar 19, it has risen by 68%.

The Fragile Five + Russia
Country GDP Growth (%) Inflation (%) Unemployment (%) Interest Rates (%)
South Africa -6 3.2 30.8 8.85
Brazil -3.9 4.52 14.3 7.45
India -7.5 4.59 6.5 5.99
Indonesia -3.49 1.68 7.07 6.21
Turkey 6.7 14.6 12.7 12.71
Russia -3.4 4.9 6.1 6.14
Source: Trading Economics

Economic data releases this week;

  • 19 January 2021
    • SA Mining, Manufacturing Production November
  • 20 January 2021
    • SA Inflation Rate December
  • 21 January 2021
    • SARB MPC Meeting/Repo rate decision, SA Retail Sales November

    An image of Chris Gilmour

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