The Markets Daily

Pragmatic is the word I’d use to describe the communication coming out after President’s Xi Jinping and Joe Biden met face-to-face at a virtual summit yesterday. A variety of topics were discussed and there seems to be a clear understanding that there are areas for cooperation that are mutually beneficial for these two global giants (and consequently likely to be beneficial for the world as a whole), but there remain significant areas of disagreement.

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COP 26, the conference, is over. The work though only really begins now. A “much watered-down” agreement was signed by 200 participant countries, which speaks to how seriously the issue of climate change is actually being taken – cooperation between 200 countries with differing specialisations, differing sources of affordable energy and at different stages of development is quite a feat. 

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Two down, one to go! That is right, we have now seen the second major domestic event of November, the MTBPS, come and go (the first was the local government elections). All that is left for the month is the November MPC. Thereafter we begin the steady slowdown to summer holidays and inevitable build up to another new year.

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It has been a bit more delayed than normal, but at long last, today, we will get a mid-year update on the state of SA’s government finances

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The long wait is over – it is US CPI day! The Bloomberg consensus survey shows a median expectation of a print of 5.9% y/y, which if realised will be the first time that inflation this high since 1991. 

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The Federal Reserve has made headlines on multiple fronts overnight.

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There is a saying that all publicity is good publicity. I’m starting to think that Elon Musk must be follower of this school of thought with his most recent foray into the public eye a poll as to whether he should sell 10% of his current stake in Tesla in response to calls for some of the richest Americans to be taxed on unrealised capital gains.

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Tantrum free! I think this is an appropriate description of the global market reaction to the announcement by the Federal Reserve that it would start asset purchase tapering before the end of the month.

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We often speak about geopolitical tensions affecting the risk sentiment in markets, however a growing tension is that between the need for energy for economic activity to continue and grow and climate change. Thus, funding for fossil fuel exploration and production is drying up threatening supply to those stations which use these more traditional feedstock to produce the electricity upon which the world is so dependent. 

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The Reserve Bank of Australia has removed its bond-yield target and we await decisions this week from the Fed and Bank of England, with the announcement of asset-purchase tapering all but certain from the Fed, while expectations are finely balanced between a rate hike and no rate hike for the Bank of England.

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