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Markit/ Stanbic PMI signals a modest deterioration in business conditions in the private sector

January 7, 2021by Nicholas Kabaso0
  • Zambia’s Markit/Stanbic PMI edged marginally lower in the final month of 2020, coming in at 49.0 from 49.3 in November. The reading signalled a further modest deterioration in business conditions in the private sector but was the second-highest reading in almost two years, with condi-tions much closer to stability than was the case earlier in 2020. Survey results show that while there were some pockets of improving demand, operations continued to be hindered by the coronavirus pandemic and currency weakness. Companies meanwhile expressed muted optimism in the 12-month outlook for business activity. Specifically, sentiment dropped to a 5-month low and was at a level below any seen prior to the coronavirus outbreak while concerns remained around the future path of the economy.
  • Konkola Copper Mines, which ZCCM Investments Holdings moved to liquidate in 2019, is insolvent, and it is increasingly likely that the only option to fund its survival is to sell assets according to the provisional liquidator.
  • Speaking yesterday, Zambian Health Minister Chitalu Chilufya stated that Zambia had recorded 850 coronavirus infections and five deaths in 24hrs, the highest number of infections since the start of the outbreak. More than half of new cases were found in the capital, Lusaka, which is now the epicenter of the second wave.
  • Global markets had to contend with a degree of political uncertainty in the US overnight, after hundreds of President Donald Trump’s sup-porters stormed the Capitol building in a bid to overturn his election defeat. This forced Congress to temporarily suspend a session to certify President-elect Joe Biden’s victory, shaking the US democracy in a way that hasn’t been seen in recent years. “To those who wreaked havoc in our Capitol today – you did not win,” VP Mike Pence, who presided over the congressional session, said as it resumed. Reports of the Capitol building’s occupation briefly shook markets, although the impact was temporary and is not presently expected to blow up into anything bigger.
  • More importantly for global markets is that the “blue wave” scenario is back in play in Washington after Democrat candidates emerged victori-ous in this week’s two Senate runoff elections in Georgia. These election results mean the US’s left-leaning party will control both the White House and Congress for at least the first two years of the Biden presidency, providing a significant boost to the president-elect’s policy man-date. While change is very much in the air in Washington, it is worth noting that the Democrats’ slim majority in Congress may prevent any rad-ical legislative changes. Nonetheless, the global market is preparing for greater debt-funded stimulus out of the US, as well as higher corporate taxes and tighter regulations.
  • All this has prompted calls for Trump’s impeachment which would put paid to any second term in office and articles for impeachment are being drawn up. The transition in power from the Trump administration will take place after all, but reflects just how divided the country is and just how polarised US politics have been through the past four years. Republicans have been hurt badly by the polarisation not just in the polls, but also within their own party that has fractured.
  • In the way of data, the latest ADP private sector payroll numbers revealed the first drop in eight months on account of the resurgence in Covid-19 infections. Private payrolls decreased 123k, highlighting the potential for the non-farm payrolls data to also disappoint.
  • Shifting to the FX markets, a broader bearish bias remains entrenched on the Kwacha at present, with the local unit continuing to extend its journey north of the 21.000 mark yesterday. Meanwhile, The USD for now remains on the defensive. News that the Democrats won both sen-ate seats in the Georgia run-off election has investors positioning for the consequences of more stimulus spending on debt, higher taxes and more regulation, none of which is deemed USD supportive. Most markets priced in USDs are performing well, as is the likes of Bitcoin which is rapidly turning into a digital safe-haven play, albeit with higher degrees of volatility. There are no indications as yet that the USD is about to re-cover. 

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Nicholas Kabaso

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