international economic news
US existing home sales decline again
Sales of previously-owned homes in the US declined by 5.1% m-o-m in June to an annual rate of 5.37 million. Sales were expected to decline as the effects of the federal tax break, which expired in April, start to wane. Despite the decline, June’s figure is still 9.8% higher than the recession lows of a year ago, but well below the levels of around 7m experienced during the peak of the property boom. Sales are expected to decline further until at least September when the paperwork from the last sales that benefited from the tax break will be finalised.

UK retail sales better than expected
Retail sales in the UK increased by a better-than-expected 0.7% m-o-m in June. This is slightly lower than May’s revised 0.8% increase. On an annual basis, sales increased by 1.3% in June. The household goods sector was the largest contributor to sales growth in June. According to analysts, the build up to the World Cup boosted sales more than was expected and they cited particularly high television sales as an example. While analysts stated that the better-than-expected result was encouraging for the UK economy, they warned that the outlook for consumer spending remains subdued due to high unemployment and indebtedness.

US leading indicators decline
The index of US leading indicators declined by 0.2% m-o-m in June, the second decline in three months. The index attempts to gauge the short-term prospects of the US economy and consists of 10 sub indicators. Of these, five increased, four declined and one remained unchanged. The index increased almost every month since April 2009 as the US economy emerged from the recession but declined by 0.1% in April before increasing by 0.5% in May. According to analysts, the index pointed to a slowdown in economic growth. However, most agree with Fed Chairman, Ben Bernanke’s statement that the economic recovery was expected to continue at a “moderate” pace, despite an “unusually uncertain” outlook.

 
international market news
developed equity markets in the black
Global developed equity markets ended the week in the black, recovering the previous week’s losses. Equity markets followed the lead of US equities, which were boosted by better-than-expected earnings results - the majority (78%) of companies exceeded their earnings estimates and 67% exceeding their revenue forecasts. One third of the S&P 500 companies reported second quarter results and earnings are currently on track to increase by approximately 34% compared to the same quarter last year. The S&P 500 (+3.5%), Dow Jones (+3.2%) and Nasdaq (+4.1%) all ended the week in the black. Japan’s Nikkei experienced a small gain of 0.2%, while most other developed markets gained around 3%.

South African economic news
SARB keeps rates on hold
As was widely expected, the South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC) kept rates unchanged at 6.5%. This is the second consecutive meeting where the MPC has left rates unchanged. In the accompanying statement Gill Marcus, SARB governor, stated that inflation is expected to average 4.5% in 3Q10 compared to the Bank’s previous estimate of 4.7%. The Bank still expects inflation to remain within the target range of 3% – 6% for the remainder of the forecast period (to 2012) and expects inflation to be 5.3% during 4Q12. The statement also highlighted that global growth is expected to be lower than previously anticipated due to the sovereign debt crisis in Europe, weaker prospects for the US economy, and efforts by the Chinese government to moderate the pace of growth. According to the SARB, volatility in European markets could heighten risk aversion and lead to outflows of capital from emerging markets. This could lead to a weaker rand and higher inflation.

South African market news
ALSI ends week higher
The ALSI benefited from positive global equity markets and gained 3.2% during the week. Resources (+4.2%), financials (+3.6%) and industrials (+2.5%) all ended the week in the black. The rand gained 2.1% against the US dollar, ending the week at R7.42/US$.



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