Global equities firmed this week on optimism over progress in US-China trade talks. The White House announced that it would delay the March 1 trade deadline for additional tariffs on Chinese goods as negotiations are progressing. Trade tensions have been a constant source of market volatility over the past year, as negotiations between the world’s two largest economies continue to play out.
Stocks in the U.S. finished slightly higher for the week, in a narrow range, as the market consolidated recent gains. Fourth-quarter GDP came in slightly stronger than expected at 2.6%, and 2.9% for full-year 2018.
US Federal Reserve Board chairman Jerome Powell was among three Fed officials to deliver testimony to Congress, expanding on the Fed’s “patient” approach to further rate increases. Powell said that with policy rates near neutral and inflation pressures muted, now is a good time for the central bank to be patient. The policy was announced in January, suspending a three-year cycle of rate hikes amid rising risks to the U.S. and global economies, and concern inflation might be slipping from its current level near the Fed’s 2 percent target.
President Trump walked away from denuclearization negotiations with North Korean leader Kim Jong Un this week in Hanoi. There were differing accounts with the U.S. indicating that the North Koreans wanted all sanctions to be lifted while the North Koreans said they were willing to accept a partial lifting of sanctions to halt nuclear and ballistic missile tests.
The eurozone fell into contraction territory for the first time in five years due to a slowdown in manufacturing in Germany and Italy. The slowdown in manufacturing is a sign that global trade is on the wane amid a tariff war between the U.S. and China.
In Brexit news British prime minister Theresa May has scheduled 12 March parliamentary vote on the Brexit withdrawal agreement she has negotiated with the European Union. The Brexit narrative has shifted from fears of crashing out of the European Union this month toward expectations for a deal or delay (see our chart of the week).
Pakistan and India remain on edge after a week of hostilities and harsh words, though Pakistan’s release of an Indian pilot cooled tensions.
Market Moves of the Week:
Locally the JSE started off the new month positively, tracking risk-on sentiment on global markets. The JSE All Share ended the week 0.38% higher at 56,203.1 points with industrials (+1.01%), resources slightly off (-0.33%) and financials (+0.60%) stronger.
Manufacturing news was downbeat, with the Absa purchasing managers’ index for manufacturing coming in well below expectations. The index, which gauges activity in the manufacturing industry, eased to 46.2 points in February from January’s 49.9.
The South African rand extended losses against a stronger dollar on Friday, after breaching the 14.00 to the dollar mark, ending the week at 14.22 to the dollar as doubts over the fate of a U.S.-China trade deal curbed appetite for risk.
In fixed income, the yield on benchmark government bond due in 2026 closed 4.5 basis points higher at 8.745 percent.
Chart of the Week:
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