Nedbank Weekly Economic Monitor

15 Aug.

Nedbank Weekly Economic Monitor: Review of 8 to 12 and preview of 15 to 19 August 2011.

• Global equity markets ended the week lower for the a third consecutive week as concern about a possible double dip recession in the US persisted and fears about Europe’s debt crisis remained.
• The rand remained under pressure on heightened risk aversion.
• Manufacturing production remained weak in June, growing by only 0,9% y-o-y, slightly down from a revised 1% in May.
• Mining production also fell in June, dropping by 0,7% y-o-y following 10,7% rise in May.
• US initial jobless claims fell to a four-month low last week.
• Japan’s economy contracted less than expected in the second quarter, with Gdp falling at an annualised 1,3% q-o-q in the second quarter, compared with market expectations of a 2,5% q-o-q decline.

Domestic

Heightened global risk aversion and profit taking kept the rand under pressure last week, with the local unit falling to R7,28 against the US dollar on Wednesday, its lowest closing since the middle of February. However, the rand consolidated some ground later in the week, ending at R7,16, down from the previous week’s close of R6,92. Against the euro and the British pound, the local unit depreciated to R10,12 and R11,67 from R9,88 and R11,34.

Bond yields were mixed over the week, with yields on the benchmark R157 2015 and the 3- and 5-year BESA actuaries falling to 7,00%, 6,65% and 7,34% respectively on Friday from 7,15%, 6,79% and 7,40% at the previous week’s closes, while those on the R186 2025 and the 10-year BESA actuaries rose to 8,38% and 8,13% respectively from 8,21% and 8,02%.

Money market rates were also mixed, with the 3-month JIBAR increasing slightly to 5,53% from 5,52%, while the 6-, 9- and 12-month JIBAR fell to 5,75%, 5,90% and 6,03% respectively from 5,78%, 5,97% and 6,11%.

Local equities ended firmer on Friday. The FTSE-JSE all share index gained 1,9% over the week, closing at 29 826,4 on Friday. Basic materials rose by 3,1% to end at 27 410,8, with the gold and platinum indices up by 7,6% and 2,2% respectively. Industrials and financials were up by 1,2% and 1,8% respectively closing at 31 461,0 and 20 566,8.

Manufacturing production remained weak in June, growing by 0,9% y-o-y, slightly down from 1% in May, but still above market expectations of a 0,6% increase. Over the month, total manufacturing production rose by a subdued 0,6% on a seasonally adjusted basis. The main drag come from big drops in output by the ‘basic iron and steel, non-ferrous metal products, metal products and machinery’ as well as the ‘petroleum, chemical products, rubber and plastic products’ industries, which reflect some pressure on exports and significant production outages at Arcelor Mittal’s steelworks in Newcastle and Vanderbijlpark. …

See the full monitor at Weekly Economic Monitor