Daily Solutions – 14 October 2016

By Alexander Forbes Investments on Oct 14, 2016 in Economic Insights General


JOHANNESBURG – The JSE opened weaker on Thursday in unsettled trade as the market attempted to price in risk relating to the future of Finance Minister Pravin Gordhan. Banks were sharply down again in early morning trade. Analysts said the market was trying to make sense of the numerous rumours floating around in the absence of decisive leadership from President Jacob Zuma with regards to the matter. Gordhan is facing fraud charges and must appear in the Pretoria regional court on November 2. Although Zuma has pledged some support for Gordhan, there is widespread talk of a cabinet reshuffle ahead of the medium-term budget policy statement on October 26, which may affect Gordhan’s position. However, views expressed by National Prosecuting authority (NPA) boss Shaun Abrahams in Parliament on Wednesday could indicate that some form of deal was in the offing, whereby the charges against Gordhan could be reconsidered. A weaker rand in early morning trade indicated renewed market concern about Gordhan’s future. analysts deem it vital that he remain on as finance minister to stave off a ratings downgrade later in the year.

US MARKETSU.S. stocks fell on Thursday, but closed well off session lows, as investors digested weak data out of China and rising oil prices while assessing the possibility of a Federal Reserve rate hike. The Dow Jones industrial average dropped 184.25 points at its lows before closing about 45 points lower, with Goldman Sachs contributing the most losses. The index briefly broke below the 18,000 mark and hit its lowest level since July. The S&P 500 fell 0.3 percent, with financials falling 1.1 percent to lead decliners. Energy stocks, meanwhile pared most of their losses as U.S. crude settled 0.52 percent higher at $50.44 per barrel as a drawdown in gasoline inventories off set a build in oil stockpiles. The Nasdaq composite underperformed, falling approximately 0.5 percent. at session lows, the three major indexes traded more than 1 percent lower at session lows.

EUROPEAN MARKETSEuropean stocks closed firmly in the red on Thursday, after weak China data triggered a slide in mining stocks, while investors digested the latest minutes release from the Federal Reserve. The Pan- European STOXX 600 came off its lows, to close down 0.87 percent provisionally. The majority of sectors posted solid losses, with miners, insurers and banks all tumbling more than 2 percent each. The U.K. FTSE 100 slipped 0.66 percent, while the French CAC and German DAX fell further, ending down 1.06 and 1.04 percent respectively. The mining sector slumped around 3 percent on Thursday, as the price of copper fell sharply during the session.

ASIAN MARKETSAsian markets were mixed on Thursday after see-sawing following soft Chinese trade data. Mainland Chinese markets shrugged off figures showing steeper-than-expected declines in China’s dollar- denominated exports in September and an unexpected drop in imports. The Shanghai composite was up 0.09 percent, while the Shenzhen composite gained 0.241 percent, after briefly slipping into negative territory. Hong Kong’s Hang Seng index remained under pressure, and was down 1.27 percent. China’s exports tumbled nearly 10 percent year-on-year in dollar-terms, and imports dipped 1.9 percent from the previous year. In yuan terms, exports fell 5.6 percent on-year, while imports rose 2.2 percent.

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Alexander Forbes Investments

Alexander Forbes Investments

Alexander Forbes Investments was established in 1997. We are a forward-thinking and trusted global investment provider, with roots in Africa. In pursuit of certainty we set out to understand our retail and institutional clients’ circumstances and risk tolerance to set clear goals. Our adaptive investment approach, called Living*Investing allows us to maximise opportunity and minimise risk at every stage of the investment cycle.

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