Over the past week, several Fed officials have tried to convince investors they should still expect the central bank to raise interest rates twice this year. The market does not seem to buy it just yet. Despite stronger than expected U.S. retail sales and business inventories released on Friday which helped drive expectations for second-quarter economic growth higher and recent more hawkish comments, investors do not seem to believe that rate hikes could happen at a faster pace than previously thought. Indeed, so far, global growth remains weak and in addition, U.S. data on inflation, manufacturing and consumer spending has been mixed. The lyrics are fairly known by now, the lower the probability of a US rate hike, the better the music for African markets.
NGSE ASI increased is the best performer this week, increasing by 2.88%. Nigerian budget minister stated this week that the country was still in talks to obtain foreign loans to help fund the record $31bn budget for this year. President Buhari promulgated the 6.06 trillion naira budget last week however there is still a lack of clarity on how the government will fund the deficit of 2.2 trillion naira. More importantly, on Wednesday, President Buhari announced while in London for a conference, that it was scraping an expensive fuel subsidy scheme. The government raised the price from NGN 86.50 to a maximum of NGN 145 per litre. Furthermore, it increased the price of gasoline by 67 percent.
JSE ASI is up 0.36%. According to the government’s Crop Estimates Committee, the country’s 2015 winter wheat crop fell 18 percent from the previous year to 1.44 million tonnes because of drought.
The EGX 30 fell 0.36%. On Friday, Standards & Poor revised its outlook for Egypt to negative from stable, and maintained its rating at ‘B-‘. Egypt has surpassed South Africa as the second largest economy in Africa, said the International Monetary Fund (IMF) in its latest World Economic Outlook.
There are still a handful of economic data points to come next week so the Federal Reserve guessing game should continue for some time. Among the most closely watched data, the consumer price index and the core CPI for April should be on top with economists cautioning that accelerating inflation will be an indication of a forthcoming Fed rate hike. The issuance of Industrial output and capacity utilisation data for April on Tuesday will provide a preview into the health of the U.S. manufacturing sector while the jobless data on Thursday will also be closely monitored. Next week should bring us closer to an answer to the infamous question: will the Fed hike its rate in June?
