The focus areas during the week included:

The S&P 500 Index declined by 1.3% in a holiday-shortened week, as positive economic data negatively impacted sentiment. The market was also hurt by a decline in Apple’s share price after news that Chinese government employees would no longer be able to use iPhones. Investors might also have been discouraged by reports that the upcoming iPhone 15 will be significantly more expensive than current models.

It is worth highlighting that US weekly jobless claims came in better than expected at 216 000, the lowest level in six months, while continuing claims fell to 1.68 million, the best level since mid-July. This occurred despite the US unemployment rate rising from 3.5% to 3.8% in August. The stronger-than-expected jobless claims encouraged a rise in short-term bond yields, with the yield on the two-year US government bond rising briefly back above 5% on Thursday.

China’s currency fell to a record low of 7.36 yuan against the US dollar after the central bank set its yuan fixing rate at a two-month low. It can be argued that ongoing pessimism about the performance of the Chinese economy and signs of resilience in the US economy have contributed to the interest rate differential between the two countries, which has increased downward pressure on the renminbi.

Emerging market currencies are down -2.6% year-to-date, hurt by a strong dollar, while the rand/US dollar is down by a significant -11.1% year-to-date – again highlighting the weakness of the South African economy relative to its peers, and the negative sentiment currently associated with the rand.

The US ISM non-manufacturing index increased from 52.7 to 54.5 in August – higher than market expectations. This was the eighth consecutive month that the index has been above the critical 50 index level. Importantly, the breadth of growth in the service sector is the largest since February. In particular, the employment index increased by four percentage points to its highest reading since late 2021.

US factory orders declined by 2.1% m/m in July, after growing by 2.3% m/m in June. The decline in July is largely attributable to aircraft orders, which fell by 43.6% in July after surging 71.1% in the preceding month.

US household net wealth rose to a record high of $154.28 trillion in Q2 2023, up from $148.78 trillion in Q1 2023 – an increase of $5.49 trillion. Net wealth has increased in each of the past three quarters, recovering the value lost during the middle of 2022.

SA’s GDP grew by 0.6% in Q2 2023, above expectations. Growth was largely driven by an improvement in manufacturing, mining and financial services. However, the South African economy remains under significant pressure.

SA’s petrol price rose by a substantial R1.71/l in September (the diesel price increased by R2.84/l), due to the higher international refined fuel price (R1.35/l) and a weaker exchange rate (R0.29c/l). The increase will add significant upward pressure to SA inflation.

South African business confidence improved marginally in Q3 2023 to 33 index points, up from 27 in Q2 2023, helped by an easing of electricity outages in the quarter. Unfortunately, business confidence remains depressed, and has been at 50 index points or lower since 2015.

South African consumer confidence index improved in Q3 2023 to -16 from -25 in Q3 2023. The improvement was largely driven by high-income households (earning more than R20 000 a month), who were encouraged by an easing of electricity outages. The confidence levels of middle-income households (earning between R5 000 and R20 000 a month) also improved, but not as significantly. Low-income confidence (earning less than R5 000 a month) remained unchanged at -16 index points.

SA’s current account deficit increased to 2.3% of GDP in Q2 2023, in line with expectations. The deterioration was largely due to a narrowing of the trade surplus from +1.6% of GDP to +0.4% of GDP.

China’s trade surplus fell to US$68.36 billion in August, as imports rose at a much faster pace than exports. On a yearly basis, exports were disappointing while imports surprised on the upside, suggesting possible stabilisation in domestic demand.

The Caixin/S&P Global survey of services activity in China fell to 51.8 in August from 54.1 in July. Although the reading remained above the 50 index level for the eighth consecutive month, it was the slowest increase since December 2022.

Euro area Investor Confidence (Sentix Index) fell more than expected in September to -21.5, down from -18.9 in August. Sentix indicated that the weakness in the German economy contributed meaningfully to the decline. German industrial production in July fell for a third consecutive month. The decline was driven by a 9% drop in vehicle manufacturing.

Germany’s trade surplus eased to €15.9 billion in July 2023 from €18.7 billion in June, as the value of exports fell 0.9% m/m while imports jumped by 1.4% m/m. Critically, Germany’s exports to China declined by 5.8% m/m, reflecting a softening of the Chinese economy.

Bank of England (BoE) Governor Andrew Bailey cast some doubt on a possible hike in UK interest rates at the upcoming 21 September policy meeting. He told a parliamentary committee: “I think we are much nearer now to the top of the [interest rate] cycle”.

Poland cut interest rates by a surprise 75 bps, reflecting weak economic activity. The market was expecting a cut of only 25 bps, given that inflation was measured at a still elevated 10.1% in August (down from a peak of 18.4% in February 2023). Poland’s parliamentary election is scheduled for 15 October, creating concerns that political bias might influence the Central Bank’s decision.