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Last week, we saw the Bank of England (BOE) keep lending rates unchanged, the European Central Bank (ECB) lower its benchmark and marginal lending rate, a strong gross domestic print out of the US as well as a good non-farm payrolls figure.
The ECB rate cut came as surprise but highlighted the central banks aggressive commitment to stabilizing the euro zone. The accommodative monetary policy announcement saw significant weakening of the Euro compounded by a strengthening dollar after the GDP and non-narm payroll figures reported out of the US supported concerns around a nearing tapering of stimulus. Perhaps the euro which had been nearing 1.40/$ mark had helped prompt the lending rate cuts by ECB President Mario Draghi to help aid the regions exports trade. Most analysts were expecting the monetary easing to come closer to year end rather than now.
Somewhat overshadowed by international data, local manufacturing production was reported as dropping 3.3% in September year-on-year, while mining production gained 0.6% year-on-year in September. There has been perhaps an early indication of sector switching in our equity market as resource counters, which are viewed as offering relative value in an expensive market start to surge. Retail counters, more specifically those with a larger credit sales exposure, have come under severe pressure this week. Truworths and Foschini released results which were subpar in terms of market expectation and this catalyzed weakness within the sector.