Week in Review: Brexit trade deal down to the wire

The UK and EU will resume face-to-face trade talks over the weekend as negotiators race to reach a deal before the looming 31 December deadline. With less than five weeks left, Britain’s Prime Minister, Boris Johnson has said "substantial and important differences" remain between the two sides. The three main issues of contention – fishing, state subsidies and the mechanism to resolve future disputes. The UK left the EU on 31 January, but it is continuing to follow eurozone rules until the end of the year as part of an 11-month transition period. If a trade deal is not agreed by then, trading between the two will default to World Trade Organization (WTO) rules.

European shares were stronger on the week although initial gains were tempered after the UK and Germany extended coronavirus restrictions and vaccine euphoria waned. The pan-European STOXX Europe 50 Index ended the week 1.7% higher, while the UK’s FTSE 100 Index was little changed.

President Trump, who is still refusing to concede the election to President-elect Biden, faced another blow when a federal appeals court rejected an attempt by the president’s re-election campaign to keep alive its effort to undo the result of Pennsylvania’s presidential election.

Earlier in the week the General Services Administration declared president-elect Joe Biden the winner of the US election, clearing the way for the formal transition from Donald Trump’s administration to begin after weeks of delay. Trump tweeted that he had directed his team to cooperate on the transition but vowed to continue fighting the election results.

Investors remained optimistic over the week buoyed by progress in the development of a vaccine and therapeutic treatments, and solid equity gains in a holiday-shortened week that saw the Dow Jones Industrial Average cross a key technical level at 30,000 for the first time in history on Tuesday. The blue-chip index reached a new high of 30,116 that day. The Dow Jones Industrial Average and S&P 500 ended Friday’s session up more than 2% each for the week, with the Nasdaq Composite climbed nearly 3% over the week.

Japan’s stock markets were closed on Monday, November 23, for Labour Thanksgiving Day. For the week, the Nikkei 225 Stock Average advanced 4.4%, marking its highest level since April 1991. Chinese stocks were also stronger with the Shanghai Composite Index gaining 0.9% for the week on the back of solid economic data prints.

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Market Moves of the Week

The JSE and the rand continued to trade near their best levels since end-February with the all share index gaining 2.1% for the week. The rand traded at R15.23/$, close to its best level since early March.

The global search for yield has seen foreign investors being net buyers of South African bonds to the tune of 17.9 billion rand ($1.18 billion) this month, aiding the local currency to strengthen this quarter. In addition to rand-supportive portfolio inflows, South Africa’s trade surplus has surged to 174 billion rand in the first nine months of this year, compared with 27 billion rand for the whole 2019, with muted imports during the coronavirus pandemic and rising metal prices fuelling the surplus.

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Chart of the Week

According to Deloitte’s annual Holiday Retail Survey, the pandemic will likely accelerate a broader trend towards online shopping during the holiday season, as consumers expect to spend only 28% of their holiday budget on brick-and-mortar stores this year. Adobe, which is following online sales in real-time at 80 of the top 100 retailers in the U.S., covering some 100 million SKUs (stock-keeping unit (SKU) is a scannable bar code), said US consumers spent $9 billion online on Black Friday, up 21.6% on a year ago.

Online Sales

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