Week in Review: Debt Ceiling Talks Stall

Market concern eased late in the week, with investors less worried that the U.S. Department of the Treasury will default on its debt in early June. On Thursday, investors were buoyed by comments from Speaker of the House of Representatives Kevin McCarthy, who said he hopes to have legislation raising the debt cap on the House floor in the week ahead. Then on Friday morning the high stakes talks over raising the debt limit appeared to stall before resuming in the Capitol on Friday evening. One of the toughest sticking points in the talks has been the question of spending caps, a key Republican demand but a red line for a significant bloc of Democrats.

US retail sales rose 0.4% in April, after falling by 0.7% the prior month and below consensus expectations at its slowest year-over-year pace (1.6%) since early in the pandemic. Core sales, which strip out sales of autos, gasoline, building supplies and food services, rose 0.7%, beating expectations for a 0.3% rise while industrial production rose 0.5% in April, well above expectations, driven in part by increased auto manufacturing.

Shares in Europe advanced amid optimism that interest rates could be close to peaking and that the U.S. would avoid a debt default. In local currency terms, the pan-European STOXX Europe 50 Index ended the week 1.79% higher while the UK’s FTSE 100 Index was flat on the week.

The European Commission raised its forecasts for eurozone economic growth this year and next, while predicting that inflation would remain stubbornly high. The latest projection calls for gross domestic product (GDP) to expand 1.1% this year and 1.6% in 2024, up from the previous forecast for growth of 0.9% and 1.5%, respectively.

The UK’s unemployment rate crept up to 3.9% in the three months through March, from 3.8% in the three months through February, the national statistics office said. However, wage growth showed little signs of easing over the period. Average weekly pay excluding bonuses rose to 6.7% compared with a year earlier, from 6.6%.

Ukrainian President Volodymyr Zelenskyy arrived Saturday in Japan for diplomatic talks with leaders of the world’s most powerful democracies participating in the Group of Seven (G-7). The G-7 have so far decided against imposing a near-outright ban on exports to Russia and will instead look to widen existing sanctions and restrictions on key Russian sectors, such as manufacturing, construction, transportation and business services.

According to the final presidential election results announced by the Supreme Election Court, the incumbent President Recep Tayyip Erdogan received 49.5% of the vote in the first round of voting in Turkey’s presidential election last Sunday versus 44.9% for his main opponent, Kemal Kilicdaroglu. The voter participation rate was high, as expected, with about 88%, or over 56 million voters, casting ballots. Erdogan is expected to defeat opposition leader Kemal Kilicdaroglu in the runoff between the two on Sunday, 28 May.

U.S. equities were higher this week, with the S&P 500 Index gaining 1.65%, and the Nasdaq Composite gaining 3.04%. It was the best weekly performance since March for both indexes, while the Dow added 0.38%.

Japanese equities reached their highest levels this week since its equity market burst in 1989. Improved corporate governance, solid domestic earnings and renewed interest on the part of foreign investors have bolstered share prices so far in 2023 while Q1 GDP growth of 1.6% doubled economists’ forecasts. The benchmark Nikkei 225 Index gained 4.8% for the week.

In China, official data showed industrial output, retail sales, and fixed asset investment grew at a weaker-than-expected pace in April from a year earlier. Nevertheless, the Shanghai Stock Exchange Index managed a gain of 0.34% for the week while in Hong Kong, the benchmark Hang Seng Index declined 0.90%.

Market Moves of the Week:

In South Africa (SA), Eskom’s warning on Thursday to brace for the grim prospect of having to slash as much as 8,000 megawatts from the grid to prevent a complete blackout will put further pressure on SA’s already fragile economic growth prospects this year. Loadshedding (rotational power cuts) has been estimated by the South African Reserve Bank to slash as much as two percentage points from economic growth.

South Africa’s unemployment rate in the first quarter of 2023 was recorded at 32,9 %, among the highest in the world. According to the Quarterly Labour Force Survey (QLFS), this is an increase of 0,2 of a percentage point compared to the fourth quarter of 2022. The youth remained vulnerable in the labour market, with the first quarter of 2023 results showing that the total number of unemployed youth (15-34 years) increased by 241 000 to 4.9 million, while there was an increase of 28 000 in the number of employed youth to 5.6 million during the same period.

S&P Global Ratings has given SA the benefit of the doubt by keeping the outlook on the country’s rating at stable, after a surprise drop in early March when it moved it from positive. S&P did not issue a report with the announcement, which came late on Friday.

The announcement of Eskom’s winter plan, which showed that rotational power cuts could be ramped up to Stage 8 as well as last weeks accusations of SA selling weapons and ammunition to Russia, continued to weigh on sentiment towards the rand with the currency touching a fresh low on Friday, before closing at R19.42 against the US dollar.

The JSE all-share index was marginally down on the week (-0.2%), with all the major sectors softer, apart from rand hedge counters that are benefiting from the weaker rand.

In the week ahead, the SA Reserve Bank (SARB) is also expected to announce yet another interest rate hike of between 25 and 50 basis points. A 50-basis point hike has become more likely given the recent sell-off in the rand as well as consumer inflation that remains stubbornly above the SARB’s target range of 3%-6%.

Chart of the Week:

The debt ceiling, set by Congress, caps how much the U.S. can borrow to pay for its remaining bills. As per the chart above the national debt has grown significantly since the early 1980s under both Republican and Democratic administrations. The largest percentage increases to the debt occurred under Presidents Ronald Reagan and George W. Bush, both of whom enacted tax cuts that led to large deficits. Flashpoints that greatly contributed to the debt over the past 50 years include the wars in Iraq and Afghanistan, the 2008 financial crisis and the more recent 2020 COVID-19 pandemic.

The Living Relay

In looking back at photos of my life it quickly dawns on me that life is not a picture, it’s a movie. We get bigger, older, wiser, richer (or poorer!). We lose loved ones, and we gain friends. We have kids and grandkids, and our kids and grandkids lose parents and grandparents. This happens to everyone all over the world all the time. We live in constant momentum.

In the financial universe, there are two interesting sets of momentum. One is pretty obvious and in theory easy to manage; the other is less obvious and as a result, more difficult to get right.

Finding Financial Independence

The first is our own personal financial growth. Most people aspire to reach financial independence. That means having enough to enable us to work because we want to, not because we have to. To reach this point we undertake a journey of labour and savings illustrated by the graph below. The money we need to see us through our life at any given point in time is depicted by line A. The savings we have accumulated at any point in time to match that need is typically depicted by line B.

Becoming financially independent is determined by our aggregate spending throughout our life rather than our earnings. Both are needed, but it is the spending side that determines how hard we need to work and for how long. The higher our standard of living, the longer it takes to be financially independent and the more we need to reach that point. Wealth, therefore, is an entirely bespoke concept. The fact that we are living longer also means that we will have to either work for longer, work harder or spend less. Any of the three will do the trick, not much else.

This is pure maths and maths is not a guessing game. It just needs honest soul searching and a calculator.

Generational Momentum

The second is less obvious and concerns the interdependent nature of succeeding generations on each other. This is life’s relay. It’s a relay where the older generation runs towards the younger generation in a never-ending race. The baton refers to the assets each generation accumulates. Understanding the rules that govern this relay is crucial if one wants to hand over the baton successfully and maintain the momentum already generated. Here are the four simple rules:

Rule No. 1: It’s a Relay

The participants must understand they are in a relay. This means a high degree of communication and mutual acceptance that at some point in time the baton will pass on. This is especially important for family businesses – the sooner one addresses succession the better.

Rule no 2: let go and take

The giver must be willing to let go, and the receiver must be willing to accept. Clinging onto the baton or having a clenched fist does not make for a smooth handover. A control-obsessed person, for instance, can cause a scarcity mentality among heirs. This typically results in squandering through overindulgence or stubbornness – insistence that they don’t need anything and can do it on their own. Don’t live like you are poor when you are not. Wealth does not spoil kids; a lack of insight and understanding of wealth and the virtue of labour does. Accepting a baton means accepting the responsibility for the momentum as well.

Rule no 3: mentoring

The receiver must be trained to be in motion, ready for the handover to happen efficiently. The baton will either be dropped or the runner will overrun the receiver if the receiver stands still or is unprepared. To be able to carry inherited wealth, coaching and participation are needed. Simple things like having your children understand your monthly expenses and income and understanding the wealth that has been accumulated are steps in the right direction. Don’t dump wealth on people who do not have insight into it and don’t ever skip generations. Take responsibility for one generation at a time. Prepare them well and allow them to sort the next generation out.

Rule no 4: Don’t look back

The receiver must run forward and look towards the next generation. Issues of neglect or distant relationships can cause heirs to look back, which can negatively affect the passing of the baton. The sins of the father will last two generations, won’t they? You can’t change the past, but you can learn from it to create a better future.

In Summary…

We all constantly move along this financial continuum. One journey is mostly on our own and the other within the sphere of succeeding generations, but both are of equal importance. Understanding the rules of each journey will create a harmonious relationship with wealth within our own lifetime and a positive momentum for future generations.

Keep in mind that the baton contains much more than worldly goods and money. The rules governing generational momentum is true for everything we pass on to our heirs. Of all things, kindness is most probably the most valuable asset in that baton. Imagine a world where that happens as a rule rather than an exception.

Written by Louis Venter, Fiduciary Specialist at Carrick Consult.

Week in Review: U.S. Inflation Moderates

Following a report released by the Labor Department on Wednesday, the U.S. consumer price index (CPI), a widely recognized measure of inflation that assesses the cost of a diverse range of goods and services, showed a monthly increase of 0.4%. This figure aligns with the estimated value provided by Dow Jones. On an annual basis, the increase amounted to 4.9%, slightly lower than the projected 5% and marking the slowest pace since April 2021. In comparison, the annual rate in March stood at 5%. Additionally, core CPI, which excludes the volatile food and energy categories, saw a monthly increase of 0.4% and a 5.5% increase from the previous year, in line with expectations.

In a separate report this week, the Labor Department revealed that the producer price index (PPI), a metric that measures prices for final demand goods and services, experienced a 0.2% increase, slightly below the Dow Jones estimate of 0.3%, following a 0.4% decline in March. Excluding food and energy, the core PPI also rose by 0.2%, aligning with expectations. On an annual basis, the headline PPI increased by 2.3%, down from 2.7% in March and representing the lowest reading since January 2021. However, despite the PPI rise being less than expected, the services index displayed a notable increase of 0.3%, the biggest move since November 2022, according to the report from the Bureau of Labor Statistics.

The Bank of England raised interest rates by 0.25% to reach 4.5% in response to persistent inflationary pressures, indicating the need for further policy tightening. Alongside this decision, the bank expressed confidence in the United Kingdom’s ability to avoid a recession this year. This marks the 12th consecutive increase in borrowing costs by the monetary policy committee (MPC), representing the bank’s most assertive rate-hiking cycle since the 1980s, driven by the goal of curbing double-digit inflation in the UK. Despite a slight decrease in March that fell below expectations, the inflation rate has remained stubbornly high at 10.1%, the highest among G7 nations. The Bank of England has adjusted its inflation forecast, now projecting it to surpass 5% by year-end, compared to the below 4% estimate made in February. This adjustment is attributed to elevated food prices, experiencing their fastest annual growth since 1977, and a resilient job market. Currently, market expectations point to the Bank of England’s terminal rate ranging from 4.75% to 5%.

China experienced its slowest consumer inflation growth in over two years in April, with the consumer price index (CPI) rising by 0.1 percent year-on-year, according to the National Bureau of Statistics (NBS). This reading represents the lowest rate since February 2021. In March, China’s inflation rate eased to 0.7 percent after reaching a recent peak of 2.8 percent in September. Core inflation, which excludes food and energy, remained unchanged at 0.7 percent year-on-year and 0.1 percent month-on-month. On the other hand, the producer price index (PPI), which indicates the prices charged by factories to wholesalers, experienced its most significant decline since May 2020. It fell for the seventh consecutive month, missing expectations, with a year-on-year decrease of 3.6 percent in April, compared to a 2.5 percent drop in March.

The performance of major indexes was mixed for the week, coinciding with the conclusion of first-quarter earnings reports. The Nasdaq Composite, which has a heavy focus on technology stocks, outperformed its counterparts, recording an increase of +0.4%. This was largely attributed to Google’s parent company, Alphabet, which announced a new artificial intelligence-based search platform. On the other hand, the Dow Jones Industrial Average, which is more narrowly focused, struggled and was weighed down by Disney’s disappointing report of a decline in subscribers to its streaming platform, Disney+. As a result, the index declined by -1.1%. Similarly, the S&P 500 experienced a decrease of -0.29% over the week. In Europe, the Euro Stoxx 50 and FTSE 100 indexes also ended the week with negative movements of -0.52% and -0.31% respectively. Across Asian-Pacific markets, there was a mixed trend. Hong Kong’s Hang Seng Index experienced the most significant decline with a weekly movement of -2.12%, followed by mainland China’s Shanghai Composite, which fell by 1.86%. In contrast, Japan’s Nikkei index recorded positive gains of 0.79% for the week.

Market Moves of the Week:

According to Stats SA, South Africa’s manufacturing production declined by 1.1% year-on-year in March 2023, following a revised 5.6% drop in February. However, there was a positive development in the month-on-month figures, with a 4.0% increase in seasonally adjusted manufacturing production for March 2023. In comparison, February 2023 experienced a month-on-month change of -1.3%, while January 2023 saw a modest increase of 0.3%. Additionally, mining production also contracted, shrinking by 2.6% year on year in March, following a revised 7.6% dip in February. This marked the 14th consecutive month of contraction in mining activity, although it was milder than market estimates of a 7.3% decline. The decline in mining was primarily attributed to electricity supply constraints and logistical bottlenecks.

The United States has accused South Africa of engaging in a covert naval operation to supply arms to Russia, which has intensified a foreign policy crisis for President Cyril Ramaphosa. This accusation raises concerns about South Africa’s connections with the Kremlin and its stance on the Ukraine war. Reuben Brigety, the U.S. ambassador to South Africa, stated in an interview with local media on Thursday that the U.S. had reason to believe that weapons and ammunition were loaded onto the Lady R, a Russian vessel under sanctions, during its docking at the Simon’s Town naval dockyard near Cape Town in December. As a result of these allegations, there was a sell-off in the South African rand and bonds, with the rand reaching a record low on Friday at R19.51 to the U.S. dollar, surpassing its previous low of R19.35 in April 2020. In response, the presidential spokesman, Vincent Magwenya, acknowledged that a Russian vessel had indeed docked at Simon’s Town last year but emphasised that there was currently no evidence to suggest that it departed with South African weapons. However, U.S. ambassador Reuben Brigety has offered an unreserved apology after admitting to crossing the line during a briefing held on Thursday, as expressed by the Department of International Relations and Cooperation (Dirco) in a diplomatic démarche on Friday.

During the week, the JSE all-share index experienced a modest gain of +0.25%, primarily driven by notable gains in the industrial sector (+2.67%). However, this positive performance was counterbalanced by declines in the property, financial, and resource industries, which saw drops of -3.12%, -2.93%, and -1.50% respectively. Meanwhile, the South African rand showed signs of recovery from its weakest level ever, but still reached a record closing low of R19.33. It experienced a significant decline of 4.98% this week, marking the largest weekly drop in nine months.

Chart of the Week:

Persistent Deceleration in Consumer Prices: Year-on-Year Growth Slows to 4.9% for the 10th Consecutive Month, Reflecting the Impact of the Federal Reserve’s Rate Tightening Measures

Week in Review: Rate Hikes and Banking Stress

The week was marked by volatility in U.S. regional banks after California-based First Republic Bank failed and was taken over by regulators. The subsector of regional banks in the S&P 500 experienced significant volatility amid concerns about potential bank failures and the credit pressures that could arise if the economy slows and unemployment increases. Despite a rally on Friday, the S&P 500 Index ended the week lower, as a result of comments from Federal Reserve Chair Jerome Powell that implied a potential delay in the pivot towards rate cuts, which had been expected by the market.

Additionally, concerns regarding the U.S. debt ceiling may have contributed to the uneasiness, with Treasury Secretary Janet Yellen warning that the agency may not be able to meet its debt obligations as early as June 1. Within the S&P 500, the information technology sector performed well and closed higher, while energy shares pulled back in correlation with the price of crude oil. Brent crude oil closed the week lower at $75,27 bbl., a -6.21% price reduction.

The U.S. Federal Reserve’s Federal Open Market Committee (FOMC) implemented the widely anticipated 25 bps hike this week, aligning with market expectations. However, the FOMC also signalled a probable pause in June, which could potentially mark the end of the current rate hiking cycle. Chairman Powell emphasized that he does not foresee the banking stress to result in a recession, and he also mentioned the possibility of a soft landing for the economy.

In April, the U.S. economy added 253,000 jobs, surpassing expectations of a monthly gain of 185,000. However, downward revisions to the data for the prior two months subtracted 149,000 jobs. The unemployment rate dropped to 3.4%, reaching its lowest level since the 1960s. Following the release of this data, 10-year U.S. Treasury yields experienced a significant increase after having initially declined earlier in the week due to concerns surrounding the banking sector stress.


According to recent data, the UK housing market is showing signs of stabilisation, as mortgage approvals for home purchases increased for the second consecutive month in March. The number of approved mortgages rose sharply to 52,011, up from 44,126 in February, representing the largest number since October 2022. Despite this improvement, it is worth noting that mortgage loan approvals remain below their monthly average of around 70,000 prior to the economic turmoil caused by the mini-budget proposal under former Prime Minister Liz Truss in September 2022, which caused a spike in long-term interest rates and led to a withdrawal of funds from the market by lenders.

In the Eurozone, major stock indexes were mixed, as recession fears and banking tremors continued to weigh on sentiment. Germany’s DAX ticked slightly higher 0.24%, while France’s CAC 40 index weakened by 0.78%. The Euro STOXX 50 also ended the week slightly lower, down 0.43%.

The Eurozone inflation data released recently was in line with expectations, with core inflation declining to 5.6% year-on-year, while headline inflation increased to 7% year-on-year, slightly surpassing consensus estimates. As anticipated, the European Central Bank (ECB) decided to moderate the pace of interest rate hikes, implementing a 25-bps adjustment. The ECB noted that previous rate increases were now exerting a notable impact on financial conditions. President Lagarde emphasized that risks to the inflation outlook remain biased towards higher levels and that the ECB still has progress to make in addressing these concerns. Forecasts suggest an additional 25-bps increase in interest rates in both June and July, aiming to reach a terminal rate of 3.75%.

At the geopolitical front, tensions between the West and Russia remain elevated. Russia has accused Ukraine of utilizing drones in an attack on the Kremlin, allegedly targeting Russian President Vladimir Putin for assassination. Kyiv has denied these allegations. On Thursday, the Kremlin asserted that the United States was the mastermind behind these attacks.

Japan’s stock markets experienced a positive start during the first two days of the week but remained closed for the remainder of the period due to the Golden Week national holidays. The Nikkei 225 Index returned 1.0%, while the broader TOPIX Index gained 0.9%. On Monday, the markets rallied significantly due to a sell-off in the yen, which helped improve the outlook for Japan’s exporters. This followed the Bank of Japan’s decision, during its April 27-28 meeting, to maintain its ultra-easy monetary policy stance for the time being.

Chinese equities ended the week on a mixed note, following a shortened week due to the holidays, as unexpectedly weak manufacturing data affected market sentiment. China’s manufacturing sector displayed signs of weakness in April, with the official Purchasing Managers’ Index (PMI) falling from March’s reading of 51.9 to 49.2, indicating a return to contraction for the first time since December 2022. Despite this, the five-day holiday saw a strong rebound in domestic tourism, with around 274 million trips taken from Saturday through Wednesday, which is an increase of approximately 71% compared to the prior year. Furthermore, spending activity surged by 129% over the holiday period compared to the same period last year, raising hopes that a sustainable recovery in the service sector could potentially offset the weakness in manufacturing and the fragile property market.

US stocks ended the week mixed, with the S&P 500 down (-0.80%), the Dow Jones Industrial Average down (-1.24%), and the tech heavy Nasdaq Composite rising slightly 0.07%. The Euro Stoxx 50 ended the weak lower (-0.43%) and FTSE 100, (-1.17%) also closed the week in the red. Asian equity markets fared better, all closing the week higher, Japan’s Nikkei 225 index gaining 1.40%, and Hong Kong’s Hang Seng index rose 0.41%. While China’s Shanghai Composite index posted a modest gain of 0.34% for the week.

Market Moves of the Week:

On the local front, there was no material economic data releases or news flow this week. From a corporate action perspective, Heineken’s completed acquisition of local brewer Distell, has paved the way for the Dutch giant to begin utilising its new South African entity as a launchpad into the African market. The three-way merger between Namibia Breweries, Distell and Heineken SA will establish a new business called “Heineken Beverages.” The new entity will hold a major stake in the South African cider market, and will go head-to-head with global competitor Anheuser-Busch InBev, which houses SA Breweries.

Global uncertainty filtered through to the local market, JSE ALSI posting a modest decline for the week (-0.11%), the only positive sector contributor was Resources up 2.76%. Both Industrials (-0.77%) and Financial (-1.93%) were down for the week. A reversal in the Rand saw the currency come under pressure this week, trading at R18.41/$ by Friday close, depreciating 0.70%. The SA listed property sector remains volatile due to interest rate uncertainty and economic growth prospects, the sector closed the week lower -1.03%.

Chart of the Week:

Following the recent FOMC (Federal Open Market Committee) announcement, the market swiftly started factoring in the likelihood of upcoming rate cuts, potentially as early as June. The accompanying chart illustrates the disparity between the current expectations for the fed funds rate over the next year and the expectations held exactly eight weeks prior. This stark contrast reflects a significant shift in the outlook for the future interest rate environment.

Source: Bloomberg.

Week in Review: Earnings Announcements in Focus

U.S. corporate earnings announcements were in the spotlight this week, as attention focused on the season’s busiest week of quarterly earnings reports. Tech heavyweights, Microsoft, Alphabet, Amazon, and Meta reported better-than-expected results, beating analyst estimates for revenue and profit, whilst cyclical sectors generally struggled.

With roughly half of S&P 500 companies having reported quarterly results, earnings for the period are down 1.7%, while revenues are up 4% versus the same quarter a year ago. In summary, this highlights that there is an encouraging level of ongoing demand, but profits remain under pressure from higher expenses.

However, concerns are growing about an economic slowdown in the coming months, as regional manufacturing activity measures fell well below expectations, signalling production cutbacks in April. The latest U.S. GDP report showed that the economy is losing momentum, with Q1 GDP slowing to 1.1% compared to 2.6% in the prior quarter, and below consensus expectations. The future of the U.S. economy depends on the strength of the job market, with historically low unemployment rates and consistent wage gains supporting consumer spending despite stubborn inflation.

The U.S. banking industry is also facing renewed turmoil, with California’s First Republic Bank reporting over USD 100 billion in deposit outflows in Q1, causing the stock to plummet. The Federal Deposit Insurance Corporation’s plan to take the bank into receivership further worsened the situation.

In the Eurozone, preliminary data showed that the economy grew by 0.1% on a quarterly basis in Q1 of 2023, missing the expected 0.2% growth estimate. The bloc’s annual GDP rate grew by 1.3% in Q1, falling short of the 1.4% expectation.

The Bank of Japan (BoJ) kept its benchmark interest rate unchanged at -0.1%, despite the Tokyo consumer price index increasing by 3.5% on a year-on-year basis in April, compared to expectations for a 2.6% increase. Unemployment increased to 2.8% in March, compared to 2.6% in the previous month.

In a landmark move, China has set up a nationwide real estate registration system, which paves the way for the implementation of a long-awaited property tax. This move is a critical component of President Xi Jinping’s Common Prosperity goals. According to state media reports, the integrated registration system, which took a decade to develop, has more than 1.5 billion real estate records across the country. This system provides the authorities with insight into who owns what and has long been regarded as a prerequisite for implementing a home ownership levy.

According to the World Bank, there is a likelihood of a decline in global commodity prices in 2023, the largest drop since the pandemic began. The bank has revised its projection for its commodity-price index and now expects a 21% reduction this year, which is more than what was anticipated in October.

India surpassed China as the world’s most populous country in April, this according to the UN. At the same time, India’s population is set to grow for several decades while the number of people in China shrinks.

Global equity markets were mixed this week. In the U.S., the Dow Jones (+0.86%), S&P 500 (+0.87%) and Nasdaq (+1.28%) all ended the week higher. In contrast, the Euro Stoxx 50 (-1.12%) and FTSE 100 (-0.55%) were negative, whilst Asian indices were mixed, including the Nikkei 225 (+1.02%), Hang Seng (-0.47%) and Shanghai Composite Index (+0.67%).

Market Moves of the Week:

In March, South Africa’s producer inflation dropped more than expected, reaching a 13-month low. This suggests that pricing pressures throughout the value chain may be easing. According to Stats SA, prices of final manufactured goods increased by 10.6% from the previous year, compared to 12.2% in February.

The U.S. Treasury Department has identified 52 entities and individuals, including some in South Africa, as part of a “vast international money-laundering and sanctions network” operating in several countries. The inclusion of South Africa in this network could potentially harm its efforts to be removed from the greylist of the Financial Action Task Force (FATF). The other countries involved in this network include Lebanon, United Arab Emirates, Angola, Ivory Coast, the Democratic Republic of the Congo, Belgium, UK, and Hong Kong.

Regarding the electricity crisis, top officials of South Africa’s ANC have endorsed a proposal to postpone the closure of Eskom’s coal-fired power plants. This is a political victory for electricity minister Ramokgopa but could hinder South Africa’s efforts to meet its climate change commitments. Eskom’s outgoing COO supports the idea of extending the life of the coal-fired power plants but believes that the power utility’s current target to improve their performance by the end of March next year is unrealistic.

The JSE All-Share Index (+0.39%) posted modest gains this week, driven by the financial (+1.51%) and industrial (+0.37%) sectors, whilst the resource sector (-0.52%) was negative. By Friday close, the rand was trading at R18.28 to the U.S. Dollar, depreciating by -1.16% for the week.

Chart of the Week:

In the U.S., there is a noteworthy phenomenon where money market funds are receiving significant inflows. This can be attributed to the U.S. yield curve being inverted. While the yield curve remains inverted (in other words, long bonds unusually carry a lower rate than short-dated bonds), then the disincentive to lend will continue, as will the appeal of moving to short-term money market accounts rather than deposits. Currently, two-year bonds offer significantly higher yields than the 10-year Treasury.

Source: Bloomberg.