THE DAILY BRIEF ECONOMICHEADLINES TUESDAY,09OCTOBER2018 - CAPRICORN ASSET MANAGEMENT

The Daily Brief

Economic Headlines                                       Tuesday, 09 October 2018

IMF lowers SA’s economic growth forecasts
The International Monetary Fund on Tuesday cut South Africa’s economic growth forecasts for this
year and next, as it urged implementation of reforms to improve policy certainty and the efficiency
of state-owned companies. Having stagnated for a decade, Africa’s most industrialised economy
slipped further in the second quarter by entering recession for the first time since 2009. In response,
President Cyril Ramaphosa announced a plan to shift government expenditure and launch an
infrastructure fund. The IMF now expects South Africa’s economy to expand 0.8%, down from a
forecast of 1.5% in July. It is expected to grow 1.4% in 2019, down from a previous estimate of 1.7%,
the Fund said in its latest World Economic Outlook report. “Recent reforms in South Africa, such as
measures adopted to tackle corruption, to strengthen procurement, and in the intention to
eliminate wasteful expenditure, are welcome,” the IMF said. “However, further reforms are needed
to increase policy certainty, improve the efficiency of state-owned enterprises, enhance flexibility in
the labor market, improve basic education, and align training with business needs.” – Moneyweb

Nene resignation won't compromise mini budget – economists
If the finance minister were to be replaced, it would not compromise the medium-term budget
policy statement (mini budget) set to be delivered on October 24, economists have said. Reports
have emerged that Finance Minister Nhlanhla Nene offered his resignation to President Cyril
Ramaphosa, little more than two weeks before the announcement of the mini budget. This followed
Nene’s testimony before the Zondo Commission of Inquiry into State Capture last week, where he
revealed that he had met with members of the Gupta family several times between 2009 and 2014.
The finance minister issued a public apology to South Africans on Friday… Economists believe that if
Nene were to be replaced, it would likely have to be by someone who would ensure policy
continuity - in line with the National Budget announced in February – and who has a proven track
record. – Fin24

Bonds in $916 Billion Wipeout Spark Fear of Worst Run Since 1976
Global bonds are hitting fresh milestones of misery. Strong U.S. data, a tighter-than-expected
monetary trajectory, rising commodity prices and brewing wage pressures are conspiring to push
Treasury yields to cycle-highs, hitting money managers of all stripes. The value of the Bloomberg
Barclays Multiverse Index, which captures investment-grade and high-yield securities around the
world, slumped by $916 billion last week, the most since the aftermath of Donald Trump’s election
victory in November 2016… The 10-year Treasury benchmark closed at 3.23 percent Friday, the

highest since May 2011, while core European and Japanese bond prices have fallen as investors bet
the era of ever-looser monetary policy is firmly over. – Bloomberg

Stock markets stage sharp sell-off amid fear of Italy-EU budget fight
Global stock markets staged a sharp sell-off on Monday amid growing concerns over a budget
showdown between Italy and the EU and the prospect of weaker growth in the Chinese
economy. Italian borrowing costs jumped and the euro dropped on foreign exchanges as the war of
words between Rome and Brussels escalated, while shares on Wall Street and other major
international markets declined amid growing concerns over the US-China trade war. Italian bond
yields jumped by as much as 30 basis points to the highest levels since early 2014 after the Italian
deputy prime minister, Matteo Salvini, attacked the European commission president, Jean-Claude
Juncker, and the economics commissioner, Pierre Moscovici, as enemies of Europe… Rome is to
submit its draft budget to the commission, the EU’s executive arm, which will check whether it is in
line with EU rules by 15 October. The euro fell almost 0.5% against the dollar, while the Italian stock
market dropped by 2.4%. The FTSE 100 closed down more than 1% at 7,233.33 while other markets
around Europe also recorded losses. – The Guardian

Stats of the Day

Data Releases
             Local Time   Country         Indicator Name               Period
             12:00        United States   NFIB Business Optimism Idx   Sep
             17:00        United States   Export Wheat Inspected       1 Oct, w/e
             17:00        United States   Export Corn Inspected        1 Oct, w/e
             17:00        United States   Exp Soybean Inspected        1 Oct, w/e

                                                                          Source: Thomson Reuters

Market Overview

                  Source: Bloomberg

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