Both the US’s FOMC and the SARB’s MPC will be meeting this week, both meetings to be watched closely. The FOMC meets on Wednesday at 9pm SA time. It is unlikely that the Fed will increase the fed funds rate at this meeting; however, the tone of the statement will be very instructive to the market. The SARB’s MPC are expected to leave the repo rate unchanged at its meeting on Thursday. Bloomberg consensus expectations are for a 50 bps increase in the repo rate to 6.75%, in line with Standard Bank’s forecast.
Investment strategies and suggestions would be to keep a close eye on any sell offs which could result from the FOMC and MPC meetings. The play currently remains with the medium to longer term investments. The 60 month uncapped PII continues to offer good value for capital growth with 100% protection and 105% participation in the TOP40 index, while the 40 and 60 month Capital Accumulator also remains an attractive investment with a return of 33% and 58% if the market remains flat or higher.
It’s a busy week on the local front with a barrage of data releases. This week sees the release of Stats SA’s December PPI print on Thursday at 11h30. Consensus expectations are pencilling in an increase in producer prices to 4.9% y/y in December from 4.3% y/y in November. We also see the release of Private sector credit, trade balance and South African budget figures on Friday.
US GDP data for Q4:15 will be released on Friday this week, along with PCE and University of Michigan inflation expectations for Q4:15. The US economy is expected to have grown at 0.8% q/q in Q4:15, down from 2% q/q in Q3:15 and in the UK we see the release of GDP figures on Thursday.
The BOJ also meets on Friday morning. It might be premature to expect the Bank to fold, and to ease policy again this week. We still feel that easing is coming and the release of new (lower) inflation forecasts at this meeting does give the BoJ a good excuse to ease again. However, we’d still put the probability of easing as no more than 30% but this probability rises a lot as we get closer to April – especially if the global economy and global financial markets continue to head south.
Article compliments of Standard Bank CIB