CONFIDENCE is going to need a boost soon if markets are to continue on from their impressive January, and it will have to come from economic data yet to be released. The little that has come from the US and Europe has not been very supportive.
So far, this year has been one shaped by optimism over a US and Chinese recovery and better conditions in Europe, with a return of confidence. To date, the only real evidence supporting this positive sentiment has been Chinese economic data for the fourth quarter.
Early last month, the world’s second-biggest economy reported growth of 7.9%, which was higher than the previous three months, and assured investors that the economy had bottomed. (Never mind that China’s economy grew at its slowest pace in 13 years.)
Apart from the reassuring Chinese data, the other facets of the good news story that has supported equity markets haven’t provided much in the way of support.
On Wednesday, US fourth-quarter gross domestic product figures showed that the economy actually contracted in the period.
Consensus expectations had been for growth to slow after a strong third quarter, but not a contraction. The surprise contraction can be explained by a sharp cutback in defence spending.
If fiscal austerity in the US remains moderate, the country should recover. However, there’s a risk of harsh cutbacks if Republicans and Democrats fail to strike a deal in Congress on automatic spending cuts or the debt ceiling.
Any failure poses "a serious downside risk", London-based Berenberg Bank said in a note.
"However, despite noisy last-minute negotiations, US politicians have so far usually delivered in the end, so that the probability of a global recession caused by the US seems fairly low."
So, there we go, US growth still hinges on politicians and whether they get their act together and kick the can down the road. It’s a very similar situation to last year and the year before.
Across the Atlantic, peripheral nations in the eurozone continue to struggle to emerge from their recession. In Spain, the fourth-biggest economy in the eurozone, gross domestic product fell 1.8% in the fourth quarter from a year earlier, the country’s National Statistics Institute reported earlier this week. Retail sales in the country, which has comparable unemployment levels to South Africa, dropped 10.7% over Christmas.
The only thing that has kept the country from requesting aid from the troika of the European Central Bank, International Monetary Fund and European Union is falling borrowing costs.
Borrowing costs are falling because of the return of confidence since September last year. Take away that and we are back to crisis headlines across Europe.
It’s going to prove difficult to maintain that confidence next month. The poor growth figures may serve as a reminder to market participants that perhaps this isn’t the right time to be bullish.
This coming month carries the risk of a deepening contraction in Spain, which could see increased speculation of a bail-out. There’s the looming Italian election that may see Silvio Berlusconi return to the European scene.
Most importantly, there’s a budget battle in the US that’s scheduled for later in the month.
The road to economic recovery is one covered in minefields. Markets, as they tend to do, have run ahead of themselves again.
ONE of the biggest complaints about many of the newly rich black class is that they don’t engage enough with society at large. They’ll probably sponsor a table at a ruling party banquet or a Black Management Forum out of duty.
As agents of change, there’s always been a greater expectation on their shoulders to do more to help bridge the gap between the haves and the have-nots.
It’s for this reason that we commend Patrice Motsepe and his family’s decision to give half of their funds to a foundation aimed at improving the lives of the poor, disabled, women and the youth.
Empowering South Africa’s majority is still one of the most debated issues in the country. Debate has raged about the merits of the creation of so-called oligarchs, much like Russia’s Roman Abramovich.
If empowerment is an attempt to bridge the gap between the haves and the have-nots, it’s for black businessmen and entrepreneurs to lead the way. As Cyril Ramaphosa said at the launch of a Shanduka foundation in 2004, it’s "our responsibility because we are shaped by these communities".