Nedbank Weekly Economic Monitor

23 May.

Nedbank Weekly Economic Monitor: Review of 16 to 20 May and preview of 23 to 27 May 2011.

• The rand was supported by higher precious metal prices.
• Consumer inflation rose by less than expected in April, increasing to 4,2 % y-o-y from 4,1 % in March.
• Retail sales remained firm in March, increasing by 5,1 % y-o-y.
• Eurozone inflation rose further in April, increasing to 2,8 % from 2,7 % in March, due to higher food and fuel prices.
• UK’s inflation also rose to its highest level since October 2008, increasing to 4,5 % in April from 4 % in March.
• In the US, housing starts fell at an annualised rate of 11 % in April, following a 7,3 % increase in March.

Comment

The rand was supported by higher precious metal prices during the week. However, the gains were partly offset by an increase in risk aversion at the end of the week following news that Fitch rating agency had downgraded Greek’s foreign and local currency ratings. The unit ended at R6,91, R9,78 and R11,21 against the US dollar, the euro and the British pound respectively on Friday, up from R7,01, R9,82 and R11,35 a week earlier.

Bonds strengthened in line with the rand, with the yields on the benchmark R157 2015 and the R186 2025 falling to 7,55% and 8,47% respectively from 7,72% and 8,67%, while the 3-, 5- and 10-year BESA actuaries declined to 7,04%, 7,73% and 8,30% from 7,14%, 7,89% and 8,52%.

In the money market, the 3-month JIBAR remained steady at 5,50%, while the 6-, 9- and 12-month JIBAR increased slightly to 5,81%, 6,09% and 6,32% from 5,80%, 6,03% and 6,31% respectively.

Locally equities were dragged down by weaker global markets on Greek’s downgrade news. The FTSE-JSE all share index lost 0,5% to end the week at 31 794,1, with industrials and basic materials down by 0,2% and 1,1% respectively to close at 32 837,0 and 30 023,2. However, financials were slightly higher at 21 469,1, up by 0,3%.

Consumer inflation rose by less than expected in April, increasing to 4,2% from 4,1% in March, compared with market expectations of a rise to 4,4%. …

See the full monitor at Weekly Economic Monitor