The Week Ahead
US jobs
In the week ending Mar 12, the advance figure for seasonally adjusted initial claims was 214 000, a decrease of 15 000 from the previous week's revised level. The previous week's level was revised up by 2 000 from 227 000 to 229 000. The 4-week moving average was 223 000, a decrease of 8 750 from the previous week's revised average. The previous week's average was revised up by 500 from 231 250 to 231 750. The advance seasonally adjusted insured unemployment rate was 1.0 percent for the week ending Mar 5, a decrease of 0.1 percentage point from the previous week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending Mar 5 was 1 419 000, a decrease of 71 000 from the previous week's revised level. This is the lowest level for insured unemployment since Feb 21, 1970 when it was 1 412 000. The previous week's level was revised down by 4 000 from 1 494 000 to 1 490 000. The 4-week moving average was 1,463 000, a decrease of 42 500 from the previous week's revised average. This is the lowest level for this average since Mar 21, 1970 when it was 1 456 750. The previous week's average was revised down by 1 000 from 1 506 500 to 1 505 500.
US other
As expected, the US Federal Open Market Committee (FOMC) raised interest rates by 25 basis points and put out the following statement; Indicators of economic activity and employment have continued to strengthen. Job gains have been strong in recent months, and the unemployment rate has declined substantially. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures. The invasion of Ukraine by Russia is causing tremendous human and economic hardship. The implications for the U.S. economy are highly uncertain, but in the near term the invasion and related events are likely to create additional upward pressure on inflation and weigh on economic activity. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With appropriate firming in the stance of monetary policy, the Committee expects inflation to return to its 2 percent objective and the labour market to remain strong. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent and anticipates that ongoing increases in the target range will be appropriate. In addition, the Committee expects to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities at a coming meeting The S&P 500 closed 6.2% higher on the week at 4 463.12 4 on Fri 18 Mar. Year to date, the index has fallen 6.4% from its closing level of 4 766.18 on Dec 31 2021. From its pandemic low of 2 237.4 on Mar 23 2020, the index has risen 99.5%.
China
As the Omicron variant surges in China, the last remaining country with a zero-Covid approach, the authorities in that country put tens of millions of people onto a week-long lockdown last week. The lockdowns are predominantly in the entire northeastern province of Jilin, where 24 million people live, and the southern cities of Shenzhen and Dongguan, with 17.5 million and 10 million, respectively. As yet, there remain no signs that China is considering abandoning its zero-Covid approach in favour of living with the virus. With a handful of vague comments about rolling out market-friendly policies in the first quarter, China's policy makers look to have set a floor under beaten down Chinese stocks. But the comments aimed at stabilization also belie the strain on China's economy as it grapples with a property slump, rising Covid cases and lockdowns, according to Barron's. The CSI 300 index of share prices listed in Shanghai and Shenzhen fell sharply last week, as did Hong Kong's Hang Seng , which dropped to a six-year low. However, after the government's intervention the Hang Seng rebounded and had its best day since 2008.
Commodities
The roller-coaster rise of oil last week is probably best summed up by Think Markets' Fawad Razaqzada in a note last Tue Mar 15 "I can't believe I am writing this so soon, but after slumping more than 20% off last week's highs, crude oil has entered the bear market territory! Today saw Brent prices collapse further, dipping below the $100 per barrel level, to reach a low so far of around $97.50. WTI has likewise fallen sharply to $94.50. Last week, these contracts were trading at highs of around $138 and $129, respectively. The collapse has been spectacular." Since then, the oil price has recovered somewhat and at time of writing, was trading around $107/barrel. The reasons for the huge volatility are many and various but the rapidly-improving Iranian sanctions situation is obviously playing a part. Last week, the British government paid Iran 405 relating to an amount owed by the UK relating to an arms deal that was never fulfilled. In return, the Iranians released long-serving prisoner Nazaneen Zaghari-Sutcliffe, who flew home to Britain after serving six years in prison on trumped-up charges of spying. This is another indication that relations with Iran are thawing. If this continues and Iranian oil comes back to the market, it could result in considerable softness in the oil market. A ceasefire in Ukraine would also improve the situation
UK/Europe
Hard on the heels of the US Fed's actions in raising interest rates, the UK's Bank of England raised its prime lending rate by 0.25% to 0.75%. The Bank's monetary policy committee said that the war in Ukraine has sparked large increases in energy prices and other commodities and is likely to worson supply chain problems that have disrupted shipments of many raw materials. The bank now expects inflation to last longer and to peak higher than before the war. It expects inflation to accelerate to around 8% by end Jun and could go even higher by year end
Tourism
New Zealand is bringing forward the reopening of its borders to international travellers, following over two years of strict restrictions. Fully vaccinated travellers from Australia will be allowed to enter the country without needing to quarantine from Apr 13, rather than the previously planned date of Jul. From May 2 fully vaccinated travellers from approximately 60 visa-waiver countries, including the UK, US, Germany, Canada, Japan and Singapore, will be permitted entry. The full reopening of the border is scheduled to take place in Oct, but New Zealand prime minister Jacinda Ardern said that this could also be brought forward. All arrivals will need to present a negative PCR test taken within 48 hours of boarding the flight to New Zealand, or a supervised rapid antigen test/LAMP test taken within 24 hours of departure. Ardern noted that tourism directly contributed 5.5 per cent to GDP prior to Covid-19, with a further $11 billion generated indirectly, and accounted for 8 per cent of the country's national workforce. Next (LON: NXT ) month will also see the reopening of Malaysia and South Korea to fully vaccinated tourists South Africa's largest commercial airline, Comair (JO: COMJ ), was suspended by the Civil Aviation Authority for three days last week over safety concerns. The suspension was lifted on Thu Mar 17
Global Trade
According to the Organisation for Economic Cooperation & Development (OECD), International trade plunged in 2020 but recovered sharply in 2021. While total trade flows are now comfortably above pre-pandemic levels, trade impacts across specific goods, services and trade partners are highly diverse, creating pressures on specific sectors and supply chains. The changes in the trade structure caused by the COVID-19 pandemic in a single year was of a similar magnitude to changes otherwise typically seen over 4-5 years. Substantial imbalances across trade partners and products remained at the end of 2021, and not all of the accumulated losses from the earlier steep declines were recouped. The heterogeneity of trade impacts and changes in trade flows across products, sources and destinations signifies high uncertainty and adjustment costs, and implies additional incentives for consumers, firms and governments to adopt new -- or to intensify existing -- risk mitigation strategies
Rest of World
In an obvious tit-for-tat move last week, Russian president Vladimir Putin signed a bill enabling Russia's airlines to transfer planes they have leased from foreign entities to a domestic register. That complicates moves by foreign lessors to repossess their aircraft because of sanctions. Earlier the aviation authority in Bermuda, where most of the foreign jets are registered, suspended safety certifications for the jets. According to Reuters, S&P last Thu 17 Mar lowered Russia's rating to 'CC' from 'CCC-', as the country reported difficulties meeting debt payments due on its dollar-denominated 2023 and 2043 Eurobonds. Russia's payment woes stem from international sanctions over Moscow's invasion of Ukraine, the ratings agency said. The sanctions have reduced the country's available foreign exchange reserves and restricted its access to the global financial system. "Although public statements by the Russian Ministry of Finance suggest to us that the government currently still attempts to transfer the payment to the bondholders, we think that debt service payments on Russia's Eurobonds due in the next few weeks may face similar technical difficulties," the agency said. Peer agencies Fitch and Moody's had also cited concerns about Russia's ability to meet its debt obligations when cutting the country's rating by several notches earlier in Mar. Fitch said last Tue Russia's ratings would be further lowered to "restricted default" if the coupon payments are not made in U.S. dollars, in line with the original terms, by the end of a 30-day grace period. Russian bonds are hovering at deeply distressed levels in very illiquid trading, with most issues trading less than a handful of times a day, according to Refinitiv data. Adding to Moscow's debt troubles, an exemption that currently allows U.S. citizens or residents to receive Russian debt and equity payments will run out on May 25. After the sanctions exemption deadline and until year-end, Russia is due to pay nearly $2 billion more on its external sovereign bonds.
South Africa
Anglo American (JO: AMSJ ) has signed a Memorandum of Understanding with EDF (PA: EDF ) Renewables, to work together towards developing a regional renewable energy ecosystem (RREE) in South Africa. The new renewable ecosystem will be designed to meet 100% of Anglo American's operational electricity requirements in South Africa by 2030. Anglo has already secured 100% renewable energy for its South American operations which will see 56% of the company's global grid supply from renewable sources by 2023. The energy ecosystem will draw on South Africa's natural renewable energy potential to develop a network of on-site and off-site solar and wind farms, amongst other opportunities. The partnership is expected to bring a host of benefits to South Africa and the region, including: Implementing 3-5 GW of renewable electricity (solar and wind) and storage over the next decade, thereby increasing total grid supply resilience. Supporting the decarbonisation initiatives of governments across Southern Africa. Stimulating the development of new economic sectors, local production and supply chains. "We are targeting carbon neutrality across our operations by 2040 and we are making good progress. Today's announcement is a further major step towards addressing our on-site energy requirements - the largest source of our operational emissions," said Mark Cutifani, Chief Executive at Anglo American. Cooperative Governance and Traditional Affairs (CoGTA) Minister, Dr Nkosazana Dlamini Zuma, has gazetted a further extension of the National State of Disaster on COVID-19, until 15 Apr 2022. In a Government Gazette issued on Mon 14 Mar, the Minister said the extension took into consideration the "need to continue augmenting the existing legislation and contingency arrangements undertaken by organs of state to address the impact of the disaster". The country has been under regulations of the National State of Disaster on COVID-19 since Mar 2020 when South Africa recorded its first cases of the virus. President Cyril Ramaphosa, during his State of the Nation Address in Feb, said government planned to scrap the National State of Disaster as the country entered a new phase in the management of the COVID-19 pandemic. Later, Health Minister, Dr Joe Phaahla, said various departments were "working on alternative measures" to replace regulations related to the National State of Disaster which could be presented to the National Coronavirus Command Council (NCCC). The JSE All Share Index (Alsi) closed 1.6% higher at 74 848 on Fri 18 Mar. From its recent low point of 37 693 on Mar 19 2020, it has risen by 98.6%. Year to date, it is up by 1.5% from its close of 73 709.39 on Dec 31 2021.
JSE listed company results out this week;
Economic data releases this week;
- 21 March 2022
- Human Rights Day public holiday
- 22 March 2022
- SA Building Plans Passed January
- 22 March 2022
- SACCI Business Ci=onfidence Indicator February, Unemployment Rate Q4, Leading Business Cycle Indicator January
- 23 March
- Inflation Rate February
- 24 March
- SARB MPC Interest Rate Decision-Expect 25 basis point rise in repo rate
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