This past week was notably volatile with several moving parts in global markets at the moment.
The main focus area continues to be Brexit with US-China having taken a backseat the last couple of weeks. European markets remain surprisingly optimistic about the Brexit outcome, even though British Parliament are unable to reach a consensus on the best way for Britain to leave the EU. Trust in Boris Johnson is fading with a whole host of outcomes still possible, even this late in the process. The EU have agreed for the Brexit deadline to be extended again (for the 3rd time) but they haven’t agreed until when – this should be announced later today.
US-China relations have been quiet as Trump’s possible impeachment and his 2020 election campaign seem to be taking most of his time. There were some positive headlines on Friday from both the US and China that they are very close to agreeing on terms for Phase 1 of the trade deal. Important to note that this is still only the start, as the major contentious issues (Phase 2) have still not been discussed and are no closer to being resolved. Some articles say that president Xi of China might be content with Phase 1 and would look to delay Phase 2 until after the 2020 US elections. These bigger issues are mostly those that the US have with China, namely the forced transfer of technology and the limits on the movement of data and subsidies by Chinese competitors. It is therefore not surprising that China will be reluctant to resolve these anytime soon.
What to look out for this week
Later today British MPs are due to vote on Government’s motion to have an early election on 12 December. This will influence the EU’s decision until when they are prepared to extend the Brexit deadline.
On Wednesday, the US Fed will announce their interest rate decision at their latest meeting. Expectations are for another 0.25% rate cut which, if it happens, will be welcomed by markets. US indices are trading close to all-time highs again and this might just be the catalyst to push it through the record levels.
Also on Wednesday, we have our Medium-Term Budget Policy Statement (MTBPS) and on Friday Moody’s will be giving their latest assessment on South Africa’s credit rating. With South Africa’s issues of increased government borrowing and slow economic growth, there is a very real risk of being downgraded, or at least our outlook being downgraded from stable to negative.