The Week Ahead


The Week Ahead


Published Date: 2021-09-27 | Source: INCE|Community | Author: Chris Gilmour

The Week Ahead

US jobs

According to the US Labor Department, initial filings for unemployment benefits rose last week, to the highest level in a month. In the week ending Sep 18, the advance figure for seasonally adjusted initial claims was 351 000, an increase of 16 000 from the previous week's revised level. The previous week's level was revised up by 3 000 from 332 000 to 335 000. The 4-week moving average was 335 750, a decrease of 750 from the previous week's revised average. The previous week's average was revised up by 750 from 335 750 to 336 500. The advance seasonally adjusted insured unemployment rate was 2.1 percent for the week ending Sep 11, an increase of 0.1 percentage point from the previous week's revised rate. The previous week's rate was revised up by 0.1 from 1.9 to 2.0 percent. The advance number for seasonally adjusted insured unemployment during the week ending Sep 11 was 2 845 000, an increase of 131 000 from the previous week's revised level. The previous week's level was revised up 49 000 from 2 665 000 to 2 714 000. The 4-week moving average was 2 804 000, a decrease of 15 750 from the previous week's revised average. This is the lowest level for this average since Mar 21, 2020 when it was 2 071 750. The previous week's average was revised up by 12 250 from 2 807 500 to 2 819 750.

US other

America's House of Representatives passed a bill that would extend the federal debt ceiling until Dec 2022 to avoid a government shutdown on Oct 1 this year. Unsurprisingly, Democrats supported the bill while Republicans opposed it. The Senate will now vote on the bill, though markets will deliver their own verdict on the matter the longer the can continues to be kicked down the road. . US President Joe Biden doubled the number of Sars-CoV-2 vaccines to 1 billion that the US is donating to developing countries, which are being provided by Pfizer at cost. At its latest FOMC meeting last Wed, the US Federal Reserve (Fed) signalled that tapering may be announced as early as the next FOMC meeting while Fed rate dots plot showed a rate increase may come next year. Fed chairman Powell's address was full of ambiguities but there is a growing likelihood of tapering occurring sooner rather than later. The Fed could "easily move ahead" with the announcement of the taper in Nov if the economy performs in line with Fed expectations, Powell said. Nine of 18 US central bank policymakers project the first rate hike to be announced next year compared to seven members in Jun. Estimates for tighter monetary policy reflect higher than initially expected inflation data as the central bank revised its forecasts higher. Inflation is expected to average 3.7% in 2021 and 2.3% in 2022, up from 3.0% and 2.1% estimated in Jun. Nevertheless, Powell is stick to his well-worn mantra that current inflationary effects in the US remain transitory. GDP forecasts are for a 5.9% growth this year, down from 7.0% estimated in Jun, reflecting supply constraints. Unemployment was revised slightly higher to 4.8% in 2021. The S&P 500 closed 0.5% higher for the week at 4 455.48 on Fri 24 Sep. Year to date, the index is up 18.6% from its closing level on 31 Dec 2020 of 3756.07. From its pandemic low of 2 237.4 on Mar 23 2020, the market is now 99.1% higher. Technical analysts are watching the S&P 500 closely as it is currently hugging the 50-day moving average. If it sinks below this for an extended period soon, it could spell the start of sustained weakness going into the typically nervous autumn period on Wall Street.


Evergrande missed a key interest payment deadline as the crisis further damaged the Chinese property market last week. Evergrande US$ bond investors have not yet received the $83.5 million interest payment that was due last Thu, according to the FT, but the company has a 30-day grace period after which, if the interest payments have still not been received, it will technically be judged to be in default. Among other interest payments due are a $45 million payment next Wed 29 Sep on its US$ 2024 bonds. The crisis has already damaged confidence with consumers, contractors and industry in China. Even if Evergrande doesn't implode, the collapse of its shares has already stalled China's property boom and shaken confidence in this critically important market. Extreme leverage, typical of property developers, combined with a few inappropriate comments from President Xi Jinping have precipitated a crisis that theoretically at least, has the potential to foment a systemic threat to global markets. Xi has been seeking to deflate the housing bubble since a speech in 2017 where he said "houses are for living in, not for speculation". This is all very well but the speculators keep on coming. Many believe the Chinese Communist Party (CCP) will let Evergrande implode in a "managed fashion", but politicians often underestimate the impact and contagion of such failures. The US would probably not let Lehman Brothers fail again, for example. Major Western funds are reported to be buying Evergrande share in the belief that Evergrande is too big to fail. Evergrande's problem is it can't complete and sell enough property at high enough prices to meet its interest and principal repayments. CCP politicians are allowed to buy land marked for development at discounted prices which they sell onto developers at exorbitant prices and the failure of Evergrande and others may mark the end of the property market gravy train for many of these politicians. On-balance-sheet liabilities amount to approximately 2% of China's annual GDP. Off-balance-sheet liabilities amount to an additional 1% of GDP. $142 billion in short term payables is owed to contractors such as cement, rebar, flooring, piping contractors and others. Many contractors have been part paid in cash and in Evergrande shares which have lost 83% of their value this year. Some of the metrics surrounding Evergrande's collapse are very scary. For example, 17% of China's urbanised population is employed or is somehow tied to the real estate and construction sector. And approximately 80% of household wealth in China is accounted for by real estate compared with 30% in the US. Real estate and construction accounts for around 29% of China's GDP, almost double Japan's 1989 property bubble peak. About 20%-25% of total housing stock in China is owned by speculative buyers with no interest in renting the properties out or moving in themselves, hence they remain empty. Xi Jinping has described the rising prices of these empty apartments as 'fictional growth' rather than 'genuine growth' but these apartments can theoretically house his plan for lifting millions more people out of rural poverty and into cities and regular work. The challenge for Xi and the CCP is to make China's property market more affordable while continuing to encourage construction.


Iron ore prices rallied last week to $110/tonne from yearly lows of $94/tonne the previous week. Concerns over a potential slowdown in China's economic growth on the back of a widespread real estate crisis added to iron ore's recent downward pressures the previous week. Iron ore has been hit by Beijing's crackdown on the steelmaking industry over emissions concerns, with some provinces reducing steel output by 20%.


The White House said last week that restrictions on travellers entering the US that were introduced at the start of the pandemic would be lifted in Nov, for people who are fully vaccinated. The restrictions, which in effect barred most passengers from Europe, China, India some other countries including SA, had been criticised as illogical. A negative PCR test will still be required for entry into the US.

Europe, UK

A global shortage of natural gas continued to worry markets last week, especially in the UK, where it has hit hardest. Prices have soared in recent weeks, following a perfect storm of adverse factors, including booming demand in Asia coinciding with tight stocks of liquefied natural gas in countries such as Qatar One of the many indirect consequences of the natural gas shortage was a shortage of carbon dioxide in the UK. A large fertilizer plant owned by US-headquartered CF Industries had to close two of its factories last week due to rising gas prices and in the process, no longer produced an important by-product, carbon dioxide. Carbon dioxide is used in a variety of processes such as meat abattoirs, carbonated soft drink and others. COVID-19 will eventually be like a cold, leading British experts said last week. Professor Sir John Bell, regius professor of medicine at Oxford University, said the virus could resemble the common cold, another coronavirus, by spring next year as people's immunity to the virus is boosted by vaccines and exposure. He reckons Britain "is over the worst" and things "should be fine" once winter has passed, adding that there was continued exposure to the virus even in people who are vaccinated. Professor Bell was speaking the day after his Oxford colleague, Professor Dame Sarah Gilbert, whose work helped to develop the Oxford-AstraZeneca vaccine, said viruses tend to become weaker as they spread around. "I think we're headed for the position Sarah describes probably by next spring would be my view," he said. "We have to get over the winter to get there but I think it should be fine." Dame Sarah also suggested COVID will cause milder illnesses as she played down fears of a more deadly new variant. Speaking at a Royal Society of Medicine webinar last Wed, she said coronavirus is unlikely to mutate into a strain that can evade vaccines because there "aren't very many places for the virus to go". Germans went to the polls on Sep 26th to choose a new leader to replace Angela Merkel, who has been German chancellor for 16 years. The Economist magazine has written a fairly hard-hitting cover story about the election entitled "The mess Merkel leaves behind", which seems somewhat unwarranted considering her successful time in office. However, as they point out, only Otto von Bismarck and Helmut Kohl served longer as Germany's chancellor than Angela Merkel has. Bismarck forged an empire, and invented Europe's first public-pension and health-care systems along the way. Kohl oversaw the reunification of East and West Germany and agreed to the replacement of the beloved Deutschmark with the euro. In comparison, Merkel's achievements are more modest. As Merkel prepares to leave office when a new government forms after an election this weekend, admiration for her steady leadership should be mixed with frustration at the complacency she has bred, according to The Economist. The polls have narrowed slightly, but the Social Democrats (SPD) are still running slightly ahead of Merkel's Christian Democrats (CDU). In the final opinion poll before the election, the SPD was leading on 26%, with the CDU on 25%.

Rest of World

Canadian prime minister Justin Trudeau is probably regretting having called a snap general election, as the results were highly disappointing for him. Although he managed to scrap back as the head of a minority government for a third term in office, he ended up with about the same number of seats in the Canadian parliament that he had prior to the election. Now that its own Sars-CoV-2 infections are more manageable, India said last week that it would resume exporting vaccines to other countries. The Serum Institute of India (SII) is a big manufacturer of the Astra¬Zeneca vaccine that is used in many poor countries. The SII also manufactured the AstraZeneca vaccine that was sold to SA in Mar this year but which was eventually re-sold to other African countries by SA. Australia is getting ready to reopen its international borders in Dec, provided its national vaccination rate reaches 80%. The vaccination rate is currently 40%, meaning that Dec may be somewhat ambitious. It sealed its borders 18 months ago, more tightly than nearly any other country apart from New Zealand. Australians will then be allowed to leave the country without special permission, and visitors will be allowed in. Thailand, which has been gradually re-opening tourist hotspots, is aiming to reopen Bangkok and other cities in Nov. This makes it especially important that SA comes off the UK's red list and gets back to a greater degree f international tourism normality as soon as possible. The Organisation for Economic Cooperation & Development (OECD) raised its inflation forecast in the G20 countries last week, partly because of higher shipping costs and energy prices. The average annual inflation rate for the G20 is now expected to be 3.7% this year and 3.9% in 2022. Brazil's monetary authorities raised the Selic rate (The Sistema Especial de Liquidação e Custodia (SELIC) (Special Clearance and Escrow System)-by one per centage point to 6.25% last week in a further attempt to contain inflation, which hit 9.7&% in Aug. It sees another one percentage point rise next month as well. The Selic began 2021 at a record low of 2% and has risen five times so far

South Africa

According to Mining Weekly, the South African mining industry has vaccinated, or partially vaccinated, 203 007 employees and contractors in South Africa, which is about 45% of the total workforce. Of that total, 49% have now been fully vaccinated against the Sars-CoV-2 virus. The mining industry has set itself a target of achieving 80% vaccination by the middle of Nov this year, with some companies already reporting between 70% and 80% vaccination levels at some sites. Minerals Council South Africa CEO Roger Baxter said the goal was "absolutely attainable". Baxter drew specific attention to the leadership role played by organised labour, which had been critical in advocating for vaccinations among employees and supporting the company-based roll-out programmes. The JSE All Share Index (Alsi) closed 1.9% higher at 64 049 on Thu 23 Sep. From its recent low point of 37 693 on Mar 19 2020, it has risen by 70%. Year to date, it is up by 7.8% from its close of 59 409 on Dec 31 2020.

The Fragile Five + Russia
Country GDP Growth (%) Inflation (%) Unemployment (%) Interest Rates (%)
South Africa 19.3 4.9 34.4 9.11
Brazil 12.4 9.68 14.1 10.99/td>
India 20.1 5.3 7 6.18
Indonesia 7.07 1.59 6.26 6.24
Turkey 21.7 19.25 12 17.62
Russia 10.5 6.68 4.5 7.28
Source: Trading Economics

JSE listed company results out this week;

  • 28 September 2021
    • Alviva
    • 30 September 2021
      • Capitec, Northam
      • September 2021

        Economic data releases this week;

        • 30 September 2021
          • SA M3 Money Supply, PSCE August
        • 1 October 2021
          • Absa Manufacturing PMI September, NAAMSA New Vehicle Sales September
          • 5 October 2021
            • IHS Markit PMI September
            • 7 October 2021
              • SA Forex Reserves September
              • 8 October 2021
                • SACCI Business Confidence Indicatr September


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