John Clemmow: Global Market Report

MONEYWEB, BY BRUCE WHITFIELD, 8 MARCH 2002

BROADCAST TRANSCRIPT: John it certainly seems as if the South African market and the currency dealers in particular are taking a very close look at Zimbabwe today. Making big news in the UK with Tony Blair’s involvement – his spat with Robert Mugabe?

JOHN CLEMMOW: Yes, it has been big news. We’ve seen Zimbabwe the lead item in most of the newscasts and it’s being discussed at length in the broadsheets, although the Sun still has different priorities! But it’s an important matter and I think that the attention that the process in Zimbabwe is drawing onto the events in Africa as a whole is not favoured very well for the South African market. In particular the comments that were coming out in the last few days about the Commonwealth meeting in which the heads of government seemed unable to come to any agreement about how they should treat Zimbabwe, and some of the comments by the African leaders that the white racists could just leave if they didn’t like it. Doesn’t really help.

MONEYWEB: Yes, the weak rand, we did chat to Arthur Buchner from BoE a moment ago. He’s got a view that the rand should bounce back quite strongly on Monday regardless of what actually goes on in Zimbabwe this weekend. Would you share that view?

JOHN CLEMMOW: No. I think that the analysis that we’ve seen so far of what might take place in Zimbabwe is extremely simplistic – there’s not a possible three outcomes there, there’s a myriad of outcomes and very few of them bode well for that particular country. And what we could be seeing in Zimbabwe is a descent into some form of anarchy which would lead to massive movements of the population out of Zimbabwe, where starvation is already breaking out, into South Africa. I’m afraid that whatever happens over the weekend, it’s not going to look particularly nice and I can’t see why the rand, if the rand has fallen on fears of Zimbabwe, is going to take any solace in what takes place. Remember first of all that the voting only takes place over the weekend. The counting starts thereafter, and what you’re going to see is the first results will come in from the cities, which one will assume will be almost entirely for the MDC, and then one has to wait and see how the results come in from the rural areas, and I think the suspicions could there be that if you get in the first day or so a huge lead for the MDC and then you start seeing that chipped away by what comes in from the rural areas, there could be some suspicions of voting irregularities and that could spark off a considerable degree of unrest. I really don’t think that the three-outcome scenario for Zimbabwe is appropriate. There is a myriad of things that could take place there.

MONEYWEB: Let’s move on to the global markets now, John. America looking positive. It’s come back a little bit since the opening, but good news on the US jobs front. Is this a sign that things are only going to get better from now on?

JOHN CLEMMOW: Very surprising news in a sense. I mean the US payrolls, as you probably said earlier, increased by 66,000 last month. The reason it’s surprising is that employment growth is a lagging indicator. Companies don’t like to hire and fire in regulated markets, even loosely regulated markets like the United States, because it costs a lot of money. You have to bring in new skills. You have to do severance packages for those you bring out. So you tend to find unemployment lags the economic cycle and, equally, employment tends to fall behind when the economic cycle moves up. So for employment numbers to be rising now it indicates that the economy must have bottomed a considerable time ago and that the US economy’s pickup is much more rapid than I think we expected just a few weeks ago.

MONEYWEB: John Clemmow at Investec London with that view on the global markets. Just to let you know what’s going on in the US at the moment – the Dow Jones industrial average up 74 points at 10,599, the S&P500 up 8 points at 1,166 and the Nasdaq at the moment is up more than 2%.

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