Nedbank Weekly Economic Monitor

13 Jun.

Nedbank Weekly Economic Monitor: Review of 6 to 10 June and preview of 13 to 17 June 2011.

• The rand close the week mixed against the major currencies.
• Manufacturing production slowed more than expected to 0,4 % y-o-y in April due to seasonal and base effects.
• Mining production rebounded to 12,4 %y-o-y in April from 0,2 % in March, mainly on the back of a strong increase in non-gold production.
• In the UK, Bank of England kept interest rates unchanged, despite rising inflation, as the Bank remained concerned about the general weakness of the economy.
• Eurozone growth quickened in the first quarter, due to rising investment and government spending.
• In the US, the trade deficit shrank in April falling to $43,7 billion from $46,7 billion, the smallest deficit this year.

Comment

The rand ended mixed on Friday, falling to R6,80 against the US dollar from R6,71 at the previous week’s close, dragged down by a weaker euro as worries about Eurozone’s debt crisis continued as well as the release of weaker than expected manufacturing data for April, which suggested that local recovery is still vulnerable. However, the unit rose to R9,76 from R9,82 against the euro and was little changed at R11,03 from R11,02 against the British pound.

In the capital market, the yields on the benchmark R157 2015 and the R186 2025 bonds rose to 7,47% and 8,50% from 7,42% and 8,39% at the previous week’s close, while the 3-, 5- and 10-year BESA actuaries increased to 7,03%, 7,70% and 8,29% respectively from 6,97%, 7,62% and 8,21%.

Money market rates were largely steady during the week. On Friday, the 3- month JIBAR ended unchanged at 5,50%, the 9-month JIBAR edged down slightly to 6,05% from 6,06% at the previous close, while the 6- and 12-month JIBAR declined to 5,74% and 6,27% respectively from 5,78% and 6,29%.

Local equities were dragged down by weaker global markets and resources stocks. The FTSE-JSE all share index closed at 31 164,4 on Friday, down by 1,3% from the previous week’s close. Basic materials lost 1,7% to end at 29 050,5, with the gold and platinum indices down by 5,9% and 1,9% respectively. Financials and industrials were also weak at 21 265,1 and 32 503,1 respectively, both down by 1% from the previous week’s close.

Manufacturing production slowed to 0,4% y-o-y in April from a downwardly revised 4,9% in March, against market expectation of 5%. The weaker outcome was mainly due to the abnormally large number of public holidays in April this year compared with last year and the higher base established in March this year. …

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