Moody’s inaction in its rating report
Moody's inaction in its rating report
In the past week, the rand was the dominant influence on the market. The
currency strengthened by 2.79% against the US dollar in response to Moody’s
inaction in its rating report.
In the past week, the rand was the dominant influence on the market. The currency strengthened by 2.79% against the US dollar in response to Moody’s inaction in its rating report. Towards the middle of the week, Moody’s did comment on its inaction, but more about that later. The rand started the week close to R14.50 against the USD and strengthened all the way to around R14.08.
The move in the currency supported the local market and the all-share index closed 2.53% stronger. The dominant sector was the financials, which closed 4.40% higher. Banks usually perform strong in an environment where the currency is strengthening. The industrial sector gained 1.98% and resources closed 2.60% up.
Moody’s commented on its inaction last Friday by noting the following:
Eskom remains a risk to the SA economy.
South Africa has limited fiscal flexibility, as the country faces weak growth in a challenging economic environment.
While the expenditure ceiling was hiked by R14bn in the 2019 budget, the country’s “long track record of adherence to
this spending framework” meant this would likely not weaken fiscal policy credibility.
The comments do not constitute a ratings action.
In international news: Having extended the Article 50 negotiating period by two weeks, the British Parliament is still no closer to a Brexit resolution than it was prior to the delay. Prime Minister Theresa May’s latest request for an extension, to 30 June, will be discussed at a European Council emergency summit scheduled for this coming Wednesday. The European Union is reluctant to grant a short extension in the light of the European Parliamentary elections next month.
In the US, President Donald Trump said although the US and China are close to a trade deal, they still need to iron out sticking points such as the status of existing tariffs and differences over enforcement mechanisms. Trump estimated an additional six weeks of negotiations would be required to finalise an agreement. This is good news for global markets, as the end of trade tension between the two major global markets will have a positive effect on global growth.
Let’s keep an eye on the currency and trust the momentum will carry on into the coming week.
SECURITAS – Wealth Management
You get recessions, you have stock market declines. If you don't understand that's going to happen, then you're not ready, you won't do well in the markets.