In the markets: What to watch this week
Fin24 - Jul 4th 2016, 09:34
Brexit remains a topical discussion. This should come as no surprise as the ramifications of such an event have an effect on so many people in many different ways.
The instability that Brexit instilled with business prompted central bankers to take action as Mark Carney, governor of the Bank of England (BoE), hinted at propping up monetary policy stimulus in an effort to balance out uncertainty that created volatility.
The occasion was taken as an opportunity by investors to ride the FTSE 100 up over 10% from Monday to Friday while the pound continued its decline.
Carney speaks again at a press conference in London on Tuesday to report on financial stability. As head of the central bank, he has more influence over the nation’s currency value than any other person and is likely to use the press conference to drop subtle clues regarding future monetary policy.
Markets are already anticipating a BoE interest rate cut within months as it continues its liquidity auctions for banks on a weekly, rather than monthly, basis and considers a “host of other measures”.
The effect should boost stock prices and weaken the sterling. In the wake of Brexit, the UK stocks found support as the pound weakened and were not as hard hit as some other markets such as in Europe.
Buying opportunities for SA
The JSE All Share recovered as the stimulus hopes fuelled a rally to around 1.3% below the level prior to the referendum results, while the rand recovered to around 2.17% from Wednesday 23 June’s strongest level.
The latest global equity market rally has delivered SA some off-shore buying as net capital flows swung in our favour, pumping up the rand and our equities. This risk-on period is likely a culmination of yield hunting from investors as advanced economy bonds have sunk into negative rates as well as the before mentioned stimulus hopes. Trade data last week showed a surprising jump, likely to be connected to the weak rand.
This week in the US, EU and Japan
This week the Federal Open Market Committee in the US is due to release its minutes of the meeting that was held two weeks ago and should provide further details about the concerns that were brought up surrounding Brexit.
The European Central Bank holds a non-monetary policy meeting on Wednesday to be watched. In Tokyo, the Bank of Japan governor, Haruhiko Kuroda, is expected to speak at a branch managers’ meeting. Signs of concern and increased monetary policy stimulus hints should give risky assets a boost.
America is closed for the 4th of July celebrations.
Other market moving data this week:
Great Britain Construction PMI
Euro Area PPI
Great Britain Services PMI
Euro Area Retail Sales
US Factory Orders
US Balance of Trade, PMI and ISM
Great Britain Manufacturing Production
US ADP Employment Change and Crude Oil Inventories
Germany Balance of Trade
Great Britain Balance of Trade
US Nonfarm PayrollsFrom Fin24
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