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Daily Dose

18 October 2018

Good Morning,

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On the wires

Fed indicates it's staying the course on rate hikes despite growing criticism from Trump…China may 'ease up' on sanctions against North Korea as the trade war drags on…Plane carrying Melania Trump forced to land…Apple launches privacy website ahead of EU speech…Japan exports fall for first time since 2016 as trade war fears mount…PIC will face an inquiry…Coligny Farm murderers to be sentenced…D-day for four senior DA members to apologise to De Lille…City of Cape Town to borrow R4bn from German state-owned KfW Bank…Two bus drivers allegedly held hostage…Passport control halts SA-born lock's France call-up…Caster receives prestigious award from Billie Jean King…Woods blames fatigue for Ryder Cup flop…Rashid, Curran star in England's big ODI win…Liverpool's Mane has surgery on hand injury.

Two Cents Worth

Since today is a Thursday, I thought it best we kick it off with a little bit of a throwback;

On this day in 1867, the U.S. formally took possession of Alaska after purchasing the territory from Russia for $7.2 million (less than two cents an acre). The Alaska purchase comprised 586,412 square miles, about twice the size of Texas.Russia wanted to sell its Alaska territory, which was remote, sparsely populated and difficult to defend, to the U.S. rather than risk losing it in battle with a rival such as Great Britain. The American public believed the land to be barren and worthless until gold was discovered in a tributary of Alaska’s Klondike River in 1896, sparking a gold rush. Alaska became the 49th state on January 3, 1959 and is now recognized for its vast natural resources. Today, 25 percent of America’s oil and over 50 percent of its seafood come from Alaska

Currency Crackdown

Thanks to Nyiko,

The rand kicked off in a strong position yesterday on the back of improved risk sentiment following good US corporate earnings. It traded in a narrow 14.10-14.25 range against the dollar supported by surprisingly better than expected local retail sales figures and as Trump continued his assault on the Fed’s policies ahead of the release of its minutes last night. While firmer gold prices and lower oil prices also provided some support.

Despite expectations of a 0.1% drop, retail sales came in 2.5% higher boosting expectations of a turn around to GDP growth and pushing the rand down as low as 14.10/$ after the close before the dollar regained some support following the release of the Fed minutes. The rand opened around 14.28/$ this morning after the minutes confirmed expectations that the Fed is likely to keep raising interest rates this year. Every Fed policymaker backed raising interest rates and generally agreed borrowing costs were set to rise further, despite Donald Trump’s view that monetary tightening had already gone too far. Markets are now pricing in an 83% chance of a rate hike, which be the fourth this year. Four more hikes have been priced in next year.

Developments in Europe were also in focus, where the Italian government is at odds with the rest of the EU its insistence on pushing through a budget deficit target of 2.4% of GDP, which is wider than its previous target of 1.9%. Italy’s draft budget for next year, which boosts welfare spending, cuts the retirement age and hikes deficit spending, could breach European Union’s fiscal rules that require Italy to lower its large public debt. The blowout has sparked concerns about more political tension with between individual members and the EU as well as a possible debt crisis. Meanwhile the pound weakened following comments from EU chief Brexit negotiator Michel Barnier that more time was needed to secure an exit deal for Britain.

On the economic front, we’re expecting the release of UK retail sales figures, US initial jobless claims and the US leading index. Meanwhile local mining production figures are expected to be finally released after last week’s delay.

 

Did you know?

In Alaska It is illegal to whisper in someone's ear while they are moose hunting.

Have a great day

Bongani

 

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