U.S. politics was always going to be centre stage this week, following the first presidential debate between candidates Biden and Trump which took place on Tuesday. By most accounts, it turned into an ill-mannered affair with little in the way of substantive dialogue. Conflicting views from major television news channels captures the debate well: “Fox News: Trump won, CNN International: Biden won”. President Donald Trump’s announcement on Twitter Thursday night that he and his wife had tested positive for COVID-19 has also suddenly added a new dynamic to the U.S. Presidential Election on 3 November.
The 2020 election will be unlike any other in history. With social distancing protocols now in effect across most of the country, likely to remain in place for weeks or even months, there's uncertainty surrounding every key element of the election process, from campaigning and voting to, of course, the debates.
On Thursday, the Democrats went ahead narrowly passing a $2.2 trillion Democrat-only fiscal stimulus package in the House of Representatives, after negotiations with the Trump administration since early August failed to yield a bipartisan deal. It appears however, that the Republican led Senate is unlikely to take up the deal and indicated that negotiations are on hold.
U.S. unemployment fell to 7.9% in September, continuing its downward trend since hitting a historic record of 14.7% in April. Over the month of September, the U.S. added just 661,000 jobs, down from the 1.4m jobs added in August.
A second wave of coronavirus infections is gaining momentum in parts of Europe. Prime Minister Boris Johnson said he won’t hesitate to impose new restrictions as governments across Europe tighten measures to battle a Covid-19 resurgence. The Spanish government ordered a partial lockdown of the capital, Madrid, and its immediate surroundings. The French Health Minister said that Paris will likely be put on maximum alert next week, a situation that could entail closing bars and restaurants and imposing more restrictions on public life. Meanwhile, Germany could face more than 19,000 new cases a day by Christmas, Chancellor Angela Merkel warned. Russia is also seeing a resurgence of cases, and Moscow has started to reopen temporary hospital wards. The ECB president, Christine Lagarde stated that the bank is ready to deploy more monetary stimulus to aid the recovery if needed, as the pandemic dampens prospects for the economy.
Brexit negotiations continue to be volatile, with conflicting media reports on progress towards a trade deal. Whilst negotiations continue, UK members of Parliament approved a draft law to create an internal market once the post-Brexit transition ends on 31 December. This bill contains clauses that would override sections of the withdrawal accord agreed to last year, prompting the European Commission to take legal action against the UK for infringing on these terms.
Despite an eventful week, most global equity indices ended in positive territory. In the U.S., the Dow Jones (+1.87%), S&P 500 (+1.53%) and Nasdaq (+1.48%) Indices were all positive. Similarly, in Europe, the Euro Stoxx 50 (+1.72%) and FTSE 100 (+1.01%) were positive, compared to the Nikkei 225 Index (-0.75%) and Shanghai Composite Index (-0.03%) which were mildly weaker.
Market Moves of the Week
South African inflation rose to 3.1% in August, in line with market expectations. This compares to CPI registering an increase of 3.2% in the prior month. The country also registered a “technical” decrease in the unemployment rate. Officially, SA’s jobless rate fell in Q2 to 23.3% from 30.1%, but the fall was a result of the national lockdown whereby job seekers were not able to seek employment (the official definition of unemployment requires that people look for work and are available for work). The number of employed persons actually fell by 2.2 million to 14.1 million in the biggest fall since the survey began in 2008.
On the corruption front, the Hawks arrested seven suspects linked to the Free State asbestos project on Wednesday. Four out of the seven suspects who had been handcuffed were government officials. The suspects will be charged with corruption, money laundering, and theft. This follows the NPA’s announcement in early September, that it was planning a high-profile arrest.
Government also announced that it will offer as much as 700,000 hectares of state land for lease as the government steps up its drive to compensate citizens forcibly removed and dispossessed during the apartheid era. The agricultural land, designated vacant or underutilized, is the most to be released since President Cyril Ramaphosa announced the government’s intention to speed up land reform in his state of the nation address in February. Since then it has handed 135,117 hectares to 275 farmers.
The JSE All Share Index ended the week up +1.18%, led higher by the financial sector (+9.91%) as “SA Inc.” enjoyed a strong week. Industrials (+0.14%) ended the week largely flat whilst resource shares (-1.53%) were weaker. By Friday close, the rand had also strengthened against most developed market currencies, trading at R16.54 to the U.S. Dollar and R21.41 to the Pound Sterling.
Chart of the Week
After a period of strong momentum, growth has begun to falter in the Euro area, largely driven by a resurgence in coronavirus infections. As the chart of the week shows, new daily virus cases have spiked past their April highs in Spain and France, leading to the imposition of new local lockdown measures.
Whilst volatility is likely to continue amid current market uncertainty over the coronavirus disease, our message to all investors remains the same – stay calm in making decisions that are aligned with your long-term goals, not current market conditions. In any market environment, we strongly believe that investors should stay properly diversified across a variety of asset classes and that clients financial plan supports their long-term goals, time horizon and tolerance for risk.
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