Ahead of the Federal Reserve’s announcement on interest rate on Wednesday, global equities rallied in anticipation of of a so-called “dovish hike” where the committee would supposedly raise interest rates however provide forward guidance which potential signaled few hikes going forward. In the United States, markets traded in positive territory, gaining strongly going into the announcement with the four major indices higher by over 1%.
Upon the announcement and release of the FOMC statement, we saw a reversal as the indices eventually closed in negative territory with the Dow Jones, S&P500 and Nasdaq Composite shedding 1.49%, 1.62% and 2.17% respectively.
Earlier in the day, European stocks closed higher with the DAX adding 0.24% while the FTSE100 and CAC40 added 0.96% and 0.49% respectively. Driving these gains were positive sentiments around Italian Banks on reports that the government had reached a deal with the EU on the 2019 budget.
On the JSE stocks closed higher with the All Share Index adding 0.65% while the Top 40 gained 311 points to close higher by 0.69%. Leading the gains on local markets were Vodacom which added 5.42% while Standard Bank and Absa Group gained 3.98% and 3.31% respectively. On the downside, Exxaro lost 3.51% while South 32 and British American Tobacco shed 3.11% and 2.21% respectively.
This morning in Asia, stocks trade in negative territory, with the scorecard being as follows: Nikkei 225 (-3.10%), Hang Seng (-1.27%) and Shanghai Composite (-0.82%).
In the US futures are negative while Tencent is lower by 0.20% while BHP Billiton in Sydney has shed 1.70%.
US Interest Rate
USDZAR – Technical View
Daily Chart: Yesterday we saw the price pulling back to the 20-day simple moving average which is once again starting to turn higher. We also saw a low of 14.10 being tested while this morning the price trades at the upper boundary of the range held since 10 December. Key resistance is 14.40 and a break above this would see 14.56 and 14.79 being tested.
USDZAR Monthly: The monthly chart sees a medium to long term bull flag with the MACD confirming the bullish trend.
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Company News –
FORMATION OF JOINT VENTURE TO INVEST IN EUROPEAN DISTRESSED DEBT (Extract)
Transaction Capital is pleased to advise shareholders that it has, through its wholly-owned subsidiary, Transaction Capital Risk Services Holdings (Pty) Ltd (TCRS), entered into a joint venture arrangement with Genki Group Limited (Genki), a company owned by the respective trusts of Transaction Capital directors, Jonathan Jawno (Jawno), Michael Mendelowitz (Mendelowitz) and Roberto Rossi (Rossi) (collectively referred to as the Founders), in order to invest in European non-performing loan portfolios and special credit situations (collectively referred to as distressed debt). Each of Transaction Capital and Genki have allocated €20 million to the joint venture.
The European distressed debt market is a multiple of times larger than the South African and Australian markets within which TCRS currently operates. Participants within this market are primarily credit management and collection platforms, asset managers or private equity funds. Over recent years, the Founders have established relationships with certain specialist credit managers and have identified an attractive segment of this market for entry by the joint venture. This segment comprises smaller, high-yield, off-market bespoke distressed corporate and consumer debt portfolios acquired and managed by these selected specialist credit managers.
The joint venture will leverage off the existing infrastructure and network established by the Founders to optimize these opportunities with the intention of achieving double digit hard currency returns and further diversify its geographic earnings base. The investments will comprise direct co-investments, partnerships with specialist credit managers in selected portfolios and investments in specifically identified debt funds, thereby accessing the European distressed debt market without concentrated risk to any particular distressed debt portfolio, asset type, collection platform or geographic region. Leverage may be introduced as appropriate.
An initial investment by TCRS and Genki of approximately €3 million each is expected to occur within Western Europe before Transaction Capital’s March 2019 half-year end. In time, TCRS intends to progressively participate in more sizeable prospects with the ultimate intention to build a European distressed debt business of scale, with the potential to leverage off TCRS’s South African low-cost collection infrastructure and technology. This could be achieved without creating unnecessary business integration costs.
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