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<p>CNBC spoke with IMF Chief Executive, Christine Lagarde on the state of the global economy, European interest rate regime as well as the US Federal Reserve Bank&#8217;s investments policy, and also touched on the possibility of another financial crisis.</p>


IMF’s Largade warns of another financial crisis

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<div class="inline-player"><a title="http://www.cnbc.com/brexit/" rel="2">Britain&#8217;s exit</a> from the <a title="http://www.cnbc.com/european-union/" rel="3">European Union</a> has not only revitalized current members but it has also inspired countries outside of the bloc to apply for membership, the International Monetary Fund&#8217;s managing director, Christine Lagarde told CNBC Tuesday.</div>
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<p>&#8220;It&#8217;s quite fascinating to see this sort of parallel track of those existing members of the EU suddenly being revitalized, rejuvenated and re-encouraged in the face of what they regarded as the adversity of one member wanting to jump ship,&#8221; Lagarde said on Tuesday.</p>
<p>Britain narrowly voted to leave the EU in a referendum on June 23 last year, an event that shocked financial markets as well as commentators across the globe. Meanwhile, formal talks between the U.K. and EU&#8217;s negotiators kicked off in June this year shortly after British Prime Minister Theresa May failed to increase her parliamentary majority in a snap general election.</p>
<div id="inline_movable_ad"> British and EU leaders now have just over a year and a half to negotiate and agree a deal, which will then go to a vote before the European Parliament.</div>
<p>When asked whether countries such as Serbia and Montenegro – both of whom are hoping to become members of the EU – could endanger the future of the bloc, Lagarde stressed the EU had been reinvigorated by the Brexit vote.</p>
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<h4 class="subtitle">&#8216;An aspiration and an inspiration&#8217;</h4>
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<p><span class="video-icon"><a class="" href="http://www.cnbc.com/video/2017/07/11/how-countries-in-europe-are-anchored-by-the-eu.html" data-videoid="3000634947" data-videotype=""><img loading="lazy" decoding="async" title="IMF's Lagarde: How countries in Europe are anchored by the EU" src="https://fm.cnbc.com/applications/cnbc.com/resources/img/editorial/2017/07/11/104579603-3ED2-REQ-0711-LagardeVid2.600x400.jpg?v=1499790809" alt="IMF’s Lagarde: How countries in Europe are anchored by the EU" width="600" height="400" /></a></span></p>
<div class="headline">IMF&#8217;s Lagarde: How countries in Europe are anchored by the EU  <time>19 Hours Ago | 02:17</time></div>
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<p>Speaking on the sidelines of an international banking conference in Dubrovnik, Croatia, Largade argued the European project was &#8220;clearly alive, kicking, an aspiration and an inspiration&#8221; for many countries in the EU.</p>
<p>&#8220;At the same time, some of these non-EU members aspiring to join (are) wanting to accelerate the process. I think that is a very strong sort of double positive message,&#8221; Lagarde told CNBC.</p>
<p><a class="inline_asset" title="http://www.cnbc.com/2017/06/16/imfs-lagarde-warns-the-uk-against-crash-brexit.html?view=story&amp;%24DEVICE%24=native-android-tablet" href="http://www.cnbc.com/2017/06/16/imfs-lagarde-warns-the-uk-against-crash-brexit.html?view=story&amp;%24DEVICE%24=native-android-tablet">Last month</a>, Lagarde suggested it would be best for the U.K. economy to prioritize a predictable exit from the EU rather than a &#8220;crash situation&#8221;.</p>
<p>In April, the Fund warned that the unpredictability surrounding Brexit posed a risk to global financial stability. It forecast at the time, the U.K. economy would expand 2 percent in 2017, before gross domestic product (<a title="http://www.cnbc.com/gdp/" rel="1">GDP</a>) declines to 1.5 percent in 2018.</p>
<p>However, the institution is unable to calculate precisely how the British economy will suffer from Brexit because it has still to define its future arrangements with the EU.</p>
<ul>
<li>Article by <a href="http://www.cnbc.com/sam-meredith/" rel="author">Sam Meredith</a> | <a href="http://www.cnbc.com/karen-tso/" rel="author">Karen Tso</a></li>
</ul>
<p><em>— CNBC&#8217;s Silvia Amaro and Karen Gilchrist contributed to this report.</em></p>
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IMF’s Lagarde reveals the unintended consequences of Brexit

<p>Britain said it will maintain duty-free access to its markets once it has left the European Union for goods from nearly 50 developing countries including Bangladesh, Sierra Leone and Haiti.</p>
<p>The government said around 48 countries would continue to benefit from tariff-free exports on all goods other than arms and ammunition to the UK and that once it had left the EU in 2019 it would explore options to expand trade relations further.</p>
<p>&#8220;Our departure from the EU is an opportunity to step up to our commitments to the rest of the world, not step away from them,&#8221; International Trade Secretary Liam Fox said in a statement.</p>
<p>&#8220;Free and fair trade has been the greatest liberator of the world&#8217;s poor, and today&#8217;s announcement shows our commitment to helping developing countries grow their economies and reduce poverty through trade.&#8221;</p>
<p>Britain embarked on its negotiations to leave the EU earlier this week, agreeing to deal first with EU priorities such as a possible &#8220;Brexit bill&#8221; before discussing future trade deals with the bloc.</p>
<p>According to the government, around 20 billion pounds a year of goods were shipped to Britain from these developing countries, accounting for around half of its clothing, a quarter of its coffee and other goods such as cocoa, bananas and roses.</p>
<p>(Reporting by Kate Holton; editing by John Stonestreet)</p>


UK to maintain duty-free access for developing countries after Brexit

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<p>As expected the Federal Reserve hiked interest rates by 25 basis points last week, and tech-stocks have taken center stage with focus of growth vs valuation discussions taking place.</p>


Phoenix Private Wealth’s outlook for global tech stocks

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<p><span class="video-icon"><a class="" href="http://video.cnbc.com/gallery/?video=3000625931" data-videoid="3000625931" data-videotype=""><img loading="lazy" decoding="async" title="In near term, second Scottish referendum seems off the table: Pro" src="https://fm.cnbc.com/applications/cnbc.com/resources/img/editorial/2017/06/09/104519692-6ED3-SSA-ThomasRaines2-06092017.600x400.jpg?v=1496987910" alt="In near term, 2nd Scottish referendum off the table: Pro" width="600" height="400" /></a></span></p>
<div class="headline">In near term, second Scottish referendum seems off the table: Pro  <time>2 Hours Ago | 01:44</time></div>
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<p><a href="http://www.cnbc.com/2017/06/08/uk-election-results.html" target="_self">The U.K. election has failed to give a decisive mandate</a> to either the ruling Conservative Party or the opposition Labour Party, sparking more political uncertainty and dealing a major blow to Prime Minister Theresa May.</p>
<p>The official result is a <a href="http://www.cnbc.com/2017/06/08/uk-election-hung-parliament-2017-result-conservative-labour-may-corbyn.html" target="_self">hung Parliament</a> with no party able to form a majority on its own. Here&#8217;s what happens next, according to the U.K. Parliament.</p>
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<h4 class="subtitle">What happens when no party wins a majority?</h4>
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<p>The ruling Conservatives will remain in power while they try to negotiate a coalition or the government may attempt to try to govern with a minority of members of Parliament. Back in 2010, the last time there was a hung Parliament, the incumbent Labour government stayed in place until a majority government could be formed.</p>
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<h4 class="subtitle">Will the party with the most seats automatically form the government?</h4>
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<div id="inline_movable_ad"> Not guaranteed. In order to govern, a party must be able to command a majority in Parliament (there are 650 seats in total) on votes of confidence and supply, either on its own or through support from other political parties whether there is a formal coalition in place or not. For instance, the Conservatives could partner with the Democratic Unionist Party (DUP) that has 10 seats to get over the finishing line. However, if they can&#8217;t seal a pact with the DUP (or someone else) and the Conservatives can&#8217;t claim a majority, May will likely resign and the Labour party will be invited next to try and form a coalition.</div>
<p>By 7:30 a.m. London time, Prime Minister Theresa May&#8217;s ruling Conservative party had won 314 seats while the opposition Labour Party, led by Jeremy Corbyn, had 261 seats. Meanwhile, the Scottish National Party (SNP) had won 35 seats, the Liberal Democrats were at 12 and the Democratic Unionist Party had secured 10. Voter turnout was at 68.7 percent, according to the BBC.</p>
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<p><span class="video-icon"><a class="" href="http://video.cnbc.com/gallery/?video=3000625930" data-videoid="3000625930" data-videotype=""><img loading="lazy" decoding="async" title="In electoral terms, almost every UK party lost: Pro" src="https://fm.cnbc.com/applications/cnbc.com/resources/img/editorial/2017/06/09/104519691-6ED3-SSA-ThomasRaines1-06092017.600x400.jpg?v=1496987861" alt="In electoral terms, almost every UK party lost: Pro" width="600" height="400" /></a></span></p>
<div class="headline">In electoral terms, almost every UK party lost: Pro  <time>2 Hours Ago | 01:49</time></div>
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<h4 class="subtitle">How long can the negotiations last?</h4>
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<p>The U.K. has had hung Parliaments before. For what it&#8217;s worth, the Conservatives and the Liberal Democrats in 2010 finally formed a coalition five days after the elections. That same deal is very unlikely this time around as both parties now stand at polar opposites when it comes to the issue of Bexit.</p>
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<h4 class="subtitle">What are the important upcoming events?</h4>
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<p>The first important date is June 13 when the Parliament reconvenes. The next important hurdle after that is the vote on amendments to the Queen&#8217;s speech, which is scheduled for June 19.</p>
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<li>Author &#8211; Neelabh Chaturvedi, special to CNBC.com</li>
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UK in political deadlock — Here’s what happens next

<p>LONDON May 10 (Reuters) &#8211; Britain needs to strike post-Brexit trade deals with countries such as Turkey and South Africa as well as the European Union, Ford said on Wednesday, underlining the scale of the challenge facing Prime Minister Theresa May to meet business demands.</p>
<p>Ford, Britain&#8217;s biggest automotive engine-maker, operates two manufacturing sites in the country and like other companies has warned that any trade restrictions after it leaves the EU could add to costs and endanger British production.</p>
<p>The U.S. carmaker denies union claims it is planning to axe 1,100 jobs at its engine plant in Wales by the end of the decade after scaling back an investment there.</p>
<p>Ford sends UK-built engines to Turkey, where it assembles its range of Transit vans and then exports many completed vehicles to Britain, benefiting from the barrier-free trade guaranteed by the EU&#8217;s customs deal with Turkey.</p>
<p>All of Ford&#8217;s Ranger pick-up trucks sold in Britain, meanwhile, are made in South Africa, reflecting the interconnected supply and sales chain made easy by EU trade deals with other countries, which Britain will now need to renegotiate as it leaves the bloc.</p>
<p>&#8220;For Ford, it&#8217;s not only important for the UK&#8217;s agreement with the 27 (remaining EU) countries but equally important are countries like Turkey and South Africa which hasn&#8217;t really been talked about,&#8221; Ford of Europe CEO Jim Farley told a London conference.</p>
<p>The company&#8217;s British-built engines face tariffs of up to 2.7 percent, while vehicle imports could be hit by tariffs of up to 10 percent if Britain has to fall back on World Trade Organization trading rules.</p>
<p>Farley suggested it would be hard for politicians to complete a full Brexit deal between now and March 2019, the end of a two-year period set out in EU legislation, and there needed to be time to adjust to the new terms.</p>
<p>&#8220;There should be a transition period. That transition period is really critical for the future of our investments in the UK,&#8221; he said.</p>
<p>May, who polls show is likely to win a landslide victory in a national election on June 8, has singled out the resurgent car industry as a key sector she wishes to back, striking a deal with Japan&#8217;s Nissan last year to expand output at its northeast England plant.</p>
<p>The government promised Nissan extra support to counter any Brexit-induced loss of competitiveness, according to a source, and the firm discussed with Britain&#8217;s business minister how to boost the uptake of electric cars, according to documents seen by Reuters, with initiatives later announced.</p>
<p>Ford suggested it could also seek government support to maintain the benefits of tariff-free trade.</p>
<p>&#8220;We are spending a lot of time thinking and talking about how we need to change our operations and what support we need from the government and other entities not only in the UK to make sure (trade) friction doesn&#8217;t get created,&#8221; Farley said. (Editing by Kate Holton and Mark Potter)</p>
<p>© Thomson Reuters 2017 All rights reserved</p>


Ford tells UK: We also need Brexit deals with Turkey, S. Africa

<p>Set against the backdrop of low growth, dire unemployment figures, and a huge infrastructure deficit – the theme of this year’s African <a href="https://www.weforum.org/events/world-economic-forum-on-africa-2017">World Economic Forum</a> (WEF) is “inclusive and sustainable growth”.</p>
<p>This is a familiar subject for policymakers. On both the regional and global stage it’s natural to speak in terms of market integration among groupings of nations to stimulate economic growth. Reducing bottlenecks to trade often serves as the focal point, with Free Trade Agreements (FTAs) typically the formal means of implementing these initiatives.</p>
<p>The idea behind all of this is that connected markets provide a larger base of customers into which companies can sell their products and services. And that, for their part, customers benefit from greater product diversity and value. This in turn creates a virtuous cycle in which a growing economy makes investment in the region more bankable. With greater access to funding, investment in needed capital projects can be accelerated, in turn reducing Africa’s sizeable infrastructure gap and stimulating inclusive growth.</p>
<p>Admittedly, this orthodox take on markets and growth is not firmly embraced across Africa. Rather, what remains prevalent is an emphasises on government intervention and the role of the ‘developmental state’ as seen in South Africa’s <a href="http://www.poa.gov.za/news/Documents/NPC%20National%20Development%20Plan%20Vision%202030%20-lo-res.pdf">National Development Plan </a>.</p>
<p>What’s not in dispute is the continent’s <a href="http://ftp01.economist.com.hk/ECN_papers/Infrastructure-Africa">infrastructure gap</a>. Road and rail transport costs in Africa are estimated to be about 50% greater than comparable regions in other parts of the world. And over 600 million people across the continent lack access to electricity while even greater numbers make do with sub-standard levels of drinking water and sanitation.</p>
<p>Estimates suggest that the continent needs as much as <a href="http://ftp01.economist.com.hk/ECN_papers/Infrastructure-Africa">$1 trillion</a> in invested capital over the next ten years to close the infrastructure gap.</p>
<p>The question is whether the WEF gathering can make a dent in this problem. In reading background studies to this year’s meeting, the forum seems more attuned to the world it would like to see, rather than the one at hand. To move beyond the “spin” the forum should address impediments to inclusive growth.</p>
<h2>New solutions to old problems?</h2>
<p>The WEF is not the first to have focused on market integration as a way to promote economic growth. The African Union Summit has recently taken steps to establish a continental <a href="https://theconversation.com/if-africa-is-serious-about-a-free-trade-area-it-needs-to-act-quickly-and-differently-70234">Free-Trade Area (FTA)</a> that would include all 54 African countries. This is on top of an alphabet soup of long established sub-regional groupings such as the East African Community, West African Community, Southern African Development Community (SADC). A grouping of these three FTAs stands as a Tripartite Free Trade Area covering a combined population of almost 600 million people.</p>
<p>Yet <a href="http://www.worldbank.org/en/news/speech/2015/12/14/deepening-african-integration-intra-africa-trade-for-development-and-poverty-reduction">trade between African nations</a> still represents only 12% of the continent’s total trade. This is far below levels seen in North America (40%), Asia (50%) and Western Europe (70%), and is often cited as an impediment to Africa’s economic development.</p>
<p>SADC’s recent history provides a useful perspective to the successes and failures of African FTAs. SADC was established in its modern form in 1992, having a mandate to promote integration of economic development programmes among member states. At its 2003 <a href="http://www.sarpn.org/documents/d0000492/P462_SADC_Communique_082003.pdf">Dar es Salaam Summit</a> it adopted an ambitious 15 year programme in which a free trade arrangement, customs union, common market and ultimately a regional monetary union were to be established.</p>
<p>While piecemeal progress has been made since then, the plan’s more ambitious aspects have been largely set aside. <a href="http://www.kas.de/upload/auslandshomepages/namibia/MRI2010/MRI2010_chapter8.pdf">Post mortems</a> cite a range of protectionist measures that are defeating its objectives. These include the reluctance of member states to wind back tariffs on goods and services, provisions promoting local content, subsidised industry assistance and visa restrictions.</p>
<p>The <a href="https://www.weforum.org/reports/the-inclusive-growth-and-development-report-2017">WEF</a> has replaced the language of FTA’s and customs unions with the call for “connecting markets, revitalising manufacturing, and integrating innovation”. The practical side of this focuses on industrial corridors in transport, energy markets and financial services and e-commerce.</p>
<p>Here too the SADC was ahead of the curve in terms of planning and adopting a regional infrastructure master <a href="http://www.sadc.int/files/7513/5293/3530/Regional_Infrastructure_Development_Master_Plan_Executive_Summary.pdf">plan</a> in 2012. This sector based “corridor” approach to development is meant to be rolled out across energy, transport, water and telecommunications.</p>
<p>But where the SADC has been quick to plan – it has fallen down in implementation.</p>
<h2>Old problems stand in the way of new solutions</h2>
<p>A report by the <a href="http://www.tips.org.za/files/report_on_regional_infrastructure_development_in_africa_tips_-_ellen_hagerman.pdf">Development Bank of Southern Africa </a> concludes that few measures to facilitate trade have yielded measurable results. National interests have tended to override regional objectives. Local and global protectionist trends have only made this more pervasive.</p>
<p>The <a href="http://www.sadc.int/files/5413/5293/3528/Regional_Infrastructure_Development_Master_Plan_Energy_Sector_Plan.pdf">SADC Energy Plan</a> may become the next non-starter in infrastructure development. So far, it has identified power generation and transmission projects costing between US$ 90 billion to over US$ 200 billion. No doubt some development finance will be allocated to these projects, but the bulk of the required investment is unlikely to move beyond countless feasibility plans.</p>
<p>Obtaining the hundreds of billions needed in power markets alone will require improved standards of governance and regulation. But member states often struggle in these areas, and comprehensive reform across the region seems an unlikely outcome until these fundamental issues are addressed.</p>
<h2>Is rhetoric better than reality?</h2>
<p>It seems incongruous that the WEF talks about the region as the least competitive globally, but follows with the observation that “fortunately, there are <a href="https://www.weforum.org/events/world-economic-forum-on-africa-2017">regional clusters</a> of global manufacturing excellence”.</p>
<p>This is not to discount clusters of excellence. But the WEF’s reference to an African Outer Space Programme within the context of growing a manufacturing base, and pointing to drones as a solution to the continent’s transport woes, is, at best, naive.</p>
<p>Hopefully the meeting will rise above the spin, and make a meaningful attempt at addressing the dire economic conditions affecting the lives of hundreds of millions of people across Africa.</p>


World Economic Forum needs to move beyond spin if it’s going to help Africa

<p>It’s official: Britain is done with Europe.</p>
<p>Prime Minister Theresa May has <a href="https://theconversation.com/the-brexit-divorce-bill-explained-74466">formally triggered</a> the process for withdrawing from the European Union, ensuring that the United Kingdom, one of the largest and most prosperous countries in the EU, will soon leave the 28-member bloc.</p>
<p>While the process could drag on for two years or more, the Brexit decision serves as a historic and stinging rebuke to proponents of a unified Europe. Perhaps more importantly, it calls into question the very future of the EU.</p>
<p>Pro-Europe commentators, on both sides of the Atlantic, have argued that Brexit is a historical blip, a rash decision made by an uninformed electorate after a vicious and one-sided campaign. But to dismiss Britain’s decision as an anomaly is to ignore the facts. We may be witnessing the twilight of the multilateral era.</p>
<h2>A not-so-perpetual peace</h2>
<p>The history of civilization has been one of peoples coming together in larger and larger collectives – from villages to city-states, from city-states to nations and from nations to international organizations. Today, we live in an era typified by the proliferation of global bodies like the United Nations, the World Trade Organization and the European Union.</p>
<p>People have created these greater communities for a number of reasons, but the overriding one has always been the most basic: security. As German philosopher Immanuel Kant wrote in 1795 <a href="https://books.google.com/books?id=AFRgKZySxi8C&amp;pg=PA530&amp;lpg=PA530&amp;dq=%22establish+a+nation+of+peoples%22&amp;source=bl&amp;ots=3ASHMzwJsG&amp;sig=4eUvcjDneWbsxWCY36EvUxuziVY&amp;hl=en&amp;sa=X&amp;ved=0ahUKEwidt8q-kvzSAhUPHGMKHeRXCMEQ6AEIHzAB#v=onepage&amp;q=%22establish%20a%20nation%20of%20peoples%22&amp;f=false">in his essay “Perpetual Peace,”</a> the only means for nations to emerge from a state of constant war was to “give up their savage, lawless freedom… and, by accommodating themselves to the constraints of common law, establish a nation of peoples that (continually growing) will finally include all the people of the earth.”</p>
<p>The European Union is arguably the greatest example of this ideal. An organization <a href="https://europa.eu/european-union/about-eu/history_en">forged</a> from the desolation of two world wars, the EU brought the states of Europe together in a continent-wide commitment to cooperation and integration. Its ultimate aim was to draw nations together so closely that war would become unimaginable.</p>
<p>An impeccable aspiration, to be sure. But Britain’s vote last year to leave the EU illustrates the costs associated with that aspiration, and with multilateralism more generally. Governments have become increasingly <a href="https://www.express.co.uk/news/politics/754118/MEP-European-Parliament-lazy-detached-Martin-Schulz?video=">detached</a> from the people they govern. Local communities have <a href="http://www.washingtonpost.com/wp-dyn/content/article/2005/06/05/AR2005060501026.html">surrendered</a> control over an ever-growing array of matters to distant bureaucrats. And people increasingly perceive that their own groups and beliefs are under siege by outsiders.</p>
<p>This sentiment is not isolated to the United Kingdom. Disillusionment with multilateral agreements is widespread today. Just look at President Donald Trump.</p>
<p>During and after the presidential campaign, Trump has repeatedly denounced America’s international agreements. The targets of his ire have ranged from free trade deals (think <a href="http://www.cnbc.com/2017/03/28/nafta-and-trump-president-plans-two-new-executive-orders.html">NAFTA</a> and the <a href="https://www.nytimes.com/2017/01/23/us/politics/tpp-trump-trade-nafta.html">Trans-Pacific Partnership</a>) to defense pacts (e.g., <a href="http://www.foxnews.com/politics/2017/03/27/trump-handed-merkel-374b-nato-bill-during-talks.html">NATO</a>) to environmental accords (see the <a href="http://www.bbc.com/news/election-us-2016-36401174">Paris climate deal</a>). In January, The New York Times even <a href="https://www.nytimes.com/2017/01/25/us/politics/united-nations-trump-administration.html">reported</a> that the Trump administration was preparing an executive order entitled “Auditing and Reducing U.S. Funding of International Organizations.” This rhetoric has struck a chord with many Americans who fear that international agreements have destroyed American industry and cost Americans jobs.</p>
<p>But to say that we are disillusioned with multilateralism does not provide an answer to the more difficult question: If not multilateralism, then what?</p>
<h2>Going it alone</h2>
<p>The answer, it appears, is aggressive unilateralism. Instead of working through multilateral institutions to solve their problems, countries are increasingly <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2826708">going it alone</a>.</p>
<p>The United States, for example, has responded to the failure of international negotiations on a range of topics by imposing its domestic laws abroad. The U.S. forces foreign banks to abide by its <a href="https://www.wsj.com/articles/the-law-that-makes-u-s-expats-toxic-1444330827">financial regulations</a>, foreign businesses to comply with its <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2636921">corruption laws</a> and foreign producers to adopt its climate change-related emissions <a href="https://www.epa.gov/importing-vehicles-and-engines">standards</a>. All of these laws were made and enforced without international agreement.</p>
<p>In many ways, the rise of unilateralism may be a great boon for societies. The outpouring of activism and political engagement in the U.K. both before and after the Brexit vote signals a certain optimism about the ability of Britons to govern themselves. With any luck, this optimism will lead to a rejuvenation of democracy in the country, a welcome contrast to the deep cynicism more typical of politics today. Similarly, U.S. action to regulate foreign companies may help provide solutions to problems that have been stubbornly resistant to global agreement and treaty-making.</p>
<p>But the disillusionment with multilateralism also comes with a dark side. It is one thing when countries like the U.S. and Britain decide to start taking action in the face of stalled negotiations over climate change and corruption. It is another when countries with very different concepts of the rule of law and democratic processes start imposing their own rules, unilaterally, on American companies.</p>
<p>Just look at Russia’s recent prosecution of Google for <a href="https://www.nytimes.com/2016/08/12/business/international/google-fine-russia-antitrust-android.html">anti-trust violations</a> or China’s <a href="https://www.wsj.com/articles/beijing-regulator-orders-apple-to-stop-sales-of-two-iphone-models-1466166711">injunction against the sale of iPhones</a> as examples.</p>
<p>Multilateralism has been a great engine of peace over the course of human civilization, and we should tread carefully in rejecting it. As Kant warned, the alternative is for us to “find perpetual peace in the vast grave that swallows both atrocities and their perpetrators.”</p>


Is Brexit the beginning of the end for international cooperation?

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<p>By Gemma Action</p>
<p>The formal two-year process governing <a href="http://www.cnbc.com/brexit/" target="_self">Britain&#8217;s departure from the European Union (EU)</a> began when Article 50 of the Treaty of Lisbon, which became law in 2009, <a href="http://www.cnbc.com/2017/03/29/brexit-article-50-trigger-letter-negotiations.html" target="_self">was triggered on Wednesday.</a></p>
<p>Here, CNBC breaks down all the issues as the Brexit negotiations begin.</p>
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<h4 class="subtitle">What happens when Article 50 has been triggered?</h4>
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<p>A handwritten letter notifying the EU of the U.K.&#8217;s intention to leave was delivered to Donald Tusk, the president of the European Council, by Tim Barrow, the U.K.&#8217;s ambassador to the EU, at 1:30 p.m. Brussels time.</p>
<p><a href="http://www.cnbc.com/2017/03/29/heres-the-brexit-letter-britain-sent-to-the-eu.html" target="_self"><strong><em>Click here to read the full letter that Theresa May sent to the EU</em></strong></a></p>
<p>The multi-page letter traveled to Brussels overnight, accompanied by a civil servant and a guard. Specifics surrounding exactly how and where Barrow met Tusk, as well as his planned route for getting to the preordained meeting point, were reportedly kept quiet for fear of impassioned Remain campaigners possibly attempting to intercept the letter and disrupt the timing of the agreed plan for this historic event.</p>
<p>Tusk has previously said the EU is ready to respond within 48 hours of obtaining the notification.</p>
<blockquote class="twitter-tweet" data-width="500" data-dnt="true">
<p lang="en" dir="ltr">The Article 50 letter. <a href="https://twitter.com/hashtag/Brexit?src=hash&amp;ref_src=twsrc%5Etfw">#Brexit</a> <a href="https://t.co/SO5R5BTvhw">pic.twitter.com/SO5R5BTvhw</a></p>
<p>&mdash; Charles Michel (@eucopresident) <a href="https://twitter.com/eucopresident/status/847048551792291840?ref_src=twsrc%5Etfw">March 29, 2017</a></p></blockquote>
<p><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script></p>
<p>The two-year time limit can be extended with the unanimous consent of both the U.K. government and the European Council, which consists of the leader of each of the 27 member states remaining within the EU post-Brexit.</p>
<p>The deal will also be put forth for approval in each member state&#8217;s respective national parliament, which could potentially slow down the process should certain lawmakers object to particular conditions. Any deal must be approved by a &#8220;qualified majority&#8221; of EU member states and the European Parliament retains the right to a veto.</p>
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<h4 class="subtitle">What will the Article 50 achieve once completed?</h4>
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<p>Article 50 simply provides a path for the process by which the U.K. will exit the EU. Once the withdrawal agreement – enacted within the U.K. by the Great Repeal Bill which will end the primacy of EU law within the country &#8211; comes into force, the EU treaties will no longer apply to the U.K. Following that, all of the permanent new terms governing the relationship going forward between the two sides will have to be negotiated and agreed. During this time, the government will decide which parts to retain, modify or cut. Some estimate this could take several more years.</p>
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<h4 class="subtitle">What if there is &#8216;no deal&#8217; agreed with the EU within the two-year exit process?</h4>
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<p>The &#8220;deal&#8221; refers to the terms governing the new post-<a href="http://www.cnbc.com/brexit/" target="_self">Brexit</a> relationship between the EU and U.K. of which a trade agreement is the critical centerpiece. If no new deal is agreed before the U.K. leaves the EU, trading terms will default to the World Trade Organization (WTO) standards which are significantly less beneficial for both sides.</p>
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<h4 class="subtitle">What powers does the UK Parliament have during the Brexit process?</h4>
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<p>The U.K. Parliament will have the right to veto the final deal but not to suggest amendments to it, effectively leaving politicians with a &#8220;take-it-or-leave-it&#8221; option.</p>
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<h4 class="subtitle">When are official talks between the UK and EU expected to begin?</h4>
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<p>Some believe that official Brexit talks could begin on April 29 at the next planned summit bringing together the leaders of the 27 remaining EU member states in Brussels.</p>
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<h4 class="subtitle">What are the biggest issues on the table?</h4>
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<p>The key topics are set to be the exit bill the U.K. is required to pay to the EU for the price of leaving, rights for EU citizens to remain within the U.K. following Brexit and vice-versa, the future freedom of movement for, above all, people and goods and the complicated political situation between Northern Ireland and the Republic of Ireland.</p>
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<h4 class="subtitle">How does the timeline fit into the UK general election cycle?</h4>
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<p>The next general election in the U.K. is scheduled for May 7, 2020. Should the U.K. successfully exit the EU within the designated two years from the triggering of Article 50, the process should be completed by April 2019, leaving around a year for campaigning ahead of the next election.</p>
<h4 class="subtitle">How did markets react ahead of the trigger?</h4>
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<p>Strong chatter anticipating that U.K. Prime Minister Theresa May would trigger Article 50 on March 29 emerged on the weekend of March 11/12. When markets opened on Monday March 13, both sterling and the U.K.&#8217;s FTSE 100 equity index rallied, with commentators suggesting that there was relief among investors that the process – now largely viewed as inevitable despite continued calls from certain high profile figures for the decision to be reversed – was finally getting underway. The FTSE 100 and the mid-cap FTSE 250 index both closed higher on Tuesday March 28, prior to the trigger being pulled on Wednesday while the British currency finished lower against the U.S. dollar.</p>
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All you need to know about Article 50 and the Brexit process

<p>In a special address at the World Economic Forum Annual Meeting, Theresa May, Prime Minister of the United Kingdom, said that Britain would stand up for free markets, free trade and globalization, and would work to ensure that they work for everyone.</p>
<p>“Forces that underpin the rules-based international system that is key to global security are somehow at risk of being undermined,” she warned. “The sense among the public is that mainstream political leaders have failed to hear their concerns for too long.” The Brexit, Britain’s decision by referendum last year to leave the European Union, was the outcome of this failure, May explained. The British “chose to build a truly global Britain,” she reckoned. “It means that Britain must face up to a period of momentous change. The UK will step up to a new leadership role.”<br />  <br /> Britain will become even more global and internationalist, May asserted. It is not turning its back on Europe. “We are a European country and proud of our European heritage, but we are also a country that has always looked beyond Europe. I want the UK to emerge from this period of change as a truly global Britain, a country that goes out into the world. We are going to be a confident country that is in control of its own destiny once again.” This new global role will not compromise Britain’s identity, May argued. “A global Britain is no less British because we are a hub for foreign investment.” Britain will continue to promote international cooperation wherever it can, she said, noting that she has convened a panel at the Annual Meeting this year to address slavery.<br />  <br /> In building this global Britain, “we have to take the people with us,” May said, recognizing that “talk of greater globalization can make people fearful.” She added: “We must never forget that our first responsibility as governments is to serve the people. We need to do more to respond to the concerns of people who feel that the modern world has left them behind.”<br />  <br /> To win the trust of the people will require new approaches by government and business, May explained. Businesses will have to show that they are playing by the same rules as everybody else. She said she welcomes <a href="http://weforum.us3.list-manage.com/track/click?u=6308fe51b420dc9ff3834abc8&amp;id=eb5ae6bec6&amp;e=42980baa5c">The Compact for Responsive and Responsible Leadership</a>, sponsored by the International Business Council of the World Economic Forum. The compact aims to create a corporate governance framework with a focus on the long-term sustainability of corporations and the long-term goals of society.<br />  <br /> Governments may have to adopt industry strategies to make markets, trade and globalization more fair and inclusive, with the benefits widely shared, the prime minister stressed. “I am determined to stand up for free markets, free trade and globalization” and “to use this moment to provide responsive and responsible leadership to bring the benefits of free trade to every corner of the world.” She concluded: “We must step up and take control to make sure that free trade and globalization work for everyone.”<br /> ﻿</p>
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May: Brexit means a global Britain that makes globalization work for all

<p>Gold rose on Monday, buoyed by safe-haven demand due to uncertainty over U.S. policy ahead of President-elect Donald Trump&#8217;s inauguration and amid concerns over Britain&#8217;s exit from the European Union.</p>
<p>Spot gold had risen 0.5 percent to $1,203.15 per ounce by 0548 GMT.</p>
<p>U.S. gold futures were up 0.6 percent at $1,203.40 per ounce.</p>
<p>&#8220;Buying shows that people are looking ahead this week with Trump&#8217;s inauguration and discussions on Brexit. There is a lot of uncertainty moving forward,&#8221; said Brian Lan, managing director at Singapore-based gold dealer GoldSilver Central.</p>
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<p>&#8220;On the physical side, people are expecting good demand from China ahead of the Chinese New Year,&#8221; Lan said. The Lunar New Year falls later this month</p>
<p>&#8220;We expect gold to retest $1,205-$1,207 again and breaching this might see $1,220 as the next level.&#8221;</p>
<p>Spot gold faces strong resistance at $1,205-$1,210 per ounce and it may hover below that or retrace towards support at $1,172, according to Reuters technical analyst Wang Tao. </p>
<p>All eyes will be on Trump&#8217;s inauguration on Friday for any clarity on his economic plans, with investors often turning to gold as a so-called safe-haven in times of economic uncertainty.</p>
<p>Trump&#8217;s campaign calls for tax cuts and more infrastructure spending have boosted U.S. shares and the dollar, as well as driving a selloff in Treasuries, but his protectionist statements and a flurry of off-the-cuff Tweets have kept many investors from adding to risky positions.</p>
<p>&#8220;This could be a slight technical recovery from the December lows amidst waiting for clues from Trump and Fed&#8217;s decisions on further rate hikes,&#8221; said V Hareesh, Research Head of Geofin Comtrade Ltd. </p>
<p>&#8220;On a broad basis, sentiment is on the downside due to rate hike possibilities by the Fed. We don&#8217;t expect a rally up to $1,400. This recovery might be capped around $1,300.&#8221;</p>
<p>Meanwhile, Prime Minister Theresa May on Tuesday will call on Britons to reject the acrimony of the Brexit referendum in a speech that some newspapers have billed as setting the stage for a &#8220;hard&#8221; exit from the EU. [nL5N1F505I]</p>
<p>Investors have been enticed into gold this month as questions over Federal Reserve policy and the Trump administration drive a bigger than usual January bounce in a beaten-down market. [nL5N1F24M2]</p>
<p>Hedge funds and money managers in the week to Jan. 10 raised their net long position in COMEX gold contracts for the first time in nine weeks. [nL1N1F31R8]</p>
<p>Spot silver rose 0.4 percent to $16.84 an ounce.</p>
<p>Platinum prices were firm at $983.10, while palladium fell 0.1 percent to $748.22.﻿</p>
<p> </p>


Gold rises on Trump uncertainty & Brexit concerns

<p>It is almost time to say goodbye and perhaps even good riddance to 2016. Aside from the political drama here and abroad (including Brexit, Trump, State capture and SARS wars), investment returns have been disappointing. The JSE All Share Index had a positive week, but the year-to-date return for local equities is only 3%, including dividends. (This number hides a wide divergence, with resources up 33%, industrials down 7% and financials struggling with a 4.7% return.) Listed property returned 6% over this period, while cash achieved around 7%. Bonds have been the best performing local asset class with a 15% year-to-date return. The looming threat of downgrades – thankfully postponed for now – probably dissuaded a lot of managers from investing in bonds.</p>
<p>Some global markets have performed better this year, with the S&amp;P 500 at record levels and a 12% year-to-date return. The FTSE 100 benefited from a weak pound and returned 15% in 2016, but Eurozone markets are flat in euros. The MSCI Emerging Markets Index returned 13% in US dollars. The problem for South African investors, though, is that the rand has gained 11% against the greenback, 13% against the euro and 24% against sterling. Therefore, translating global returns into rands results in negative returns. The stronger rand this year is also a factor behind the disappointing returns of local equities, given that the majority of earnings of JSE-listed companies are earned abroad.</p>
<p><strong>Disappointing returns</strong></p>
<p>According to Morningstar, the average retail balanced fund returned only 0.7% year-to-date to end November. The range of returns over this period is very wide, with the top fund returning 20% and the worst fund -8%. This is a fitting testament to the difficult environment, particularly the sharp reversal in January of the trends that persisted in the previous three years (a weakening rand, falling commodity prices, negative emerging market sentiment). However, the longer-term picture looks better, with the average balanced fund achieving an annualised 6.6% return over three years and 10.5% per annum over five years.</p>
<p><strong>Third quarter growth disappoints</strong></p>
<p>South Africa’s economy grew at a slower pace than expected in the third quarter &#8211; by a seasonally-adjusted and annualised 0.2% &#8211; after 3.5% growth in the second quarter. The economy contracted in the first quarter, leading to real growth of only 0.4% for the first nine months of 2016. Gross domestic product (GDP) grew by 0.7% in the third quarter of 2015.</p>
<p>Clearly this snails-pace rate of growth means the country is getting poorer in real per capita terms, but what matters now is to watch out for signs of improvement. Turning points are, however, difficult to spot as data is usually mixed while sentiment remains negative.</p>
<p>The biggest contributor to the disappointing quarterly growth rate was a 26% quarter-on-quarter drop in exports, followed by a 1% decline in real fixed investment spending (gross fixed capital formation).</p>
<p>The sharp decline in exports was due to a drop in both volume and export prices during the quarter. However, Transnet reported strong growth in export cargo volumes at its ports in November. Meanwhile, global trade conditions appear to be improving. The composite Global Purchasing Managers’ Index hit an 11-month high in November, pointing to the strongest global growth in a year. China’s latest import numbers surprised to the upside, showing positive growth after two years of declines.</p>
<p><strong>Higher inflation</strong></p>
<p>A big part of depressed real growth locally is higher inflation. The GDP deflator, a broad measure of inflation at all levels of the economy, increased 6.6% year-on-year in the third quarter. To gauge the earnings ability of companies operating in the local economy, one needs to look at nominal growth. The economy grew by 7.5% in the year to the end of the third quarter, a rebound from nominal growth of only 4 &#8211; 5% at the end of last year. Private sector gross operating surplus, a rough proxy for the profits of listed and unlisted companies, grew by 6.6% year-on-year in the third quarter while there was virtually no growth at the end of 2015.</p>
<p><strong>Real income growth still positive</strong></p>
<p>Employee compensation (the wage bill) is still growing at 8% per year, despite high unemployment. With inflation expected to decline next year, helped along by a firmer rand, it implies positive overall real income growth for households in total, supporting their spending ability. While debt constrains this ability, it has been easing. The cost of servicing debt fell slightly to 9.6% of disposable income in the third quarter. Consumer confidence has already improved. The FNB/BER Consumer Confidence Index has rebounded from a recession-like 11 index points to -3 index points in the third quarter. On balance, consumers are still pessimistic, but much less so than during the low levels earlier in the year. Household debt levels remain high, but have steadily declined over the past seven years, standing at 74% of disposable income in the third quarter.</p>
<p>Household consumption spending grew by 2.6% quarter-on-quarter in the third quarter, but would have been 3.2% if the decline in transport spending (mainly vehicle purchases) hadn’t happened. However, new car sales have already increased by 6% compared to the third quarter.</p>
<p>Although fixed investment spending contracted in the third quarter (for the fourth consecutive quarter), the pace of contraction slowed to only 1%, compared to -10% in the second quarter. The investment recession might be close to an end.</p>
<p><strong>Is there light at the end of the tunnel?</strong></p>
<p>Economic conditions on the ground appear to be improving globally and locally (at the very least they are not deteriorating). Market valuations are generally good signs of the prospects of future investment returns. The valuation signals on local equities are mixed: forward price to earnings ratio on the local market of 14 is above the long-term average, but the dividend yield and price-to-book ratios are in line. There is also a large divergence on a sector level, creating opportunities for active management to outperform. Local property fundamentals remain challenging, but the sector is offering more value after its 10% decline. Assuming distribution grows in line with inflation and a starting yield of 6%, listed property can deliver low single-digit returns. An improved domestic interest rate outlook should benefit property too, but also shows that there is little upside to money market investments. Moving up the yield curve improves the attractiveness of fixed income assets, with the 10-year bond still yielding 8.8% despite the good run this year.</p>
<p>Despite the rout on global bond markets in November, developed market bond yields are not attractive. Global equity valuations are slightly above long-term averages, with US equities more expensive than European equities. These valuations suggest global equity returns could be broadly in line with long-term averages. Emerging markets are cheap compared to developed markets and offer attractive long-term returns. Returns from global assets will clearly depend on where the rand goes. With our large current account deficit (4.1% of GDP in the third quarter), the rand is vulnerable to shifts in global risk appetite and capital outflows, which in turn are likely to be influenced by the expected path of US interest rates. Nonetheless, the big drivers of the rand – the US dollar, commodity prices and sentiment towards emerging markets – are already close to historically extreme levels. From this angle, substantial declines in the rand are unlikely. However, global diversification is prudent, irrespective of what the short-term outlook for the exchange rate is.</p>
<p><strong>Return prospects muted but not dismal</strong></p>
<p>Investors have become accustomed to excellent returns over the past decade. For instance, domestic equity returns averaged 10% per year in real terms between 2000 and 2015. Compared to this, current return expectations are therefore muted. But they are not dismal and an appropriately diversified portfolio should still be able to beat inflation over the longer term. The key for investors is to remain focused on their long-term financial plans. 2016 was full of surprises and 2017 will probably also be. Don’t get side-tracked by the headlines, surprises and unexpected developments that are bound to happen. You will experience potholes, speed-bumps and delays on any long journey. The key is to stick to your goals and focus on your long-term plan.  ﻿</p>
<p>Chart 1: Rolling real ten-year local equity returns. 2000 to 2015﻿</p>
<p> <img loading="lazy" decoding="async" src="/media/19280489/old_mutual_chart_1_13_dec.gif" width="571" height="317" alt="Old Mutual Chart 1 13 Dec"/>﻿</p>
<p>Source: Datastream</p>
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<p>Chart 2: South African gross domestic product growth﻿</p>
<p><img loading="lazy" decoding="async" src="/media/19280496/old_mutual_chart_2_13_dec.gif.png" width="569" height="376" alt="Old Mutual Chart 2 13 Dec .gif"/>﻿</p>
<p>Source: Datastream</p>
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<p style="text-align: left;" align="center"><em>Authors: Dave Mohr (Chief Investment Strategist) &amp; Izak Odendaal (Investment Strategist), Old Mutual Multi-Managers﻿</em></p>
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Op-Ed: Difficult year almost over

<p>Donald Trump was declared the next president of the United States (US) on Wednesday, November 9. The election outcome caught markets by surprise, and the global economy is now facing significant uncertainty only months after another surprise decision by the United Kingdom to exit the European Union.</p>
<p>The consequences of a Trump presidency for Africa remain uncertain. Some broad Trump policy ideologies that have emerged include trade protectionism, fiscal austerity and anti-immigration, amongst others.</p>
<p>That said, questions remain as to how aggressive these policies will be pursued – Mr Trump’s stately victory speech was somewhat surprising and a sign that he will adopt a more measured approach as president.</p>
<p>The impact on global financial markets has been more muted than analysts feared, with initial sharp losses on major equity indices partially overturned on Wednesday already.</p>
<p>The safe-haven appeal of gold stood the Johannesburg Stock Exchange (JSE) in good stead, although the rand lost some 2.4% of its value against the greenback by the time of writing. Having weathered some tumultuous storms this year emanating from global risk events, financial markets seem to have taken a more sanguine approach to the US political dynamics.</p>
<p>With regard to monetary policy, the latest political developments could very well see a slower pace of US interest rate normalisation, due to an increase in uncertainty and given that US economic growth is seen as lower-than-baseline under a Trump presidency. In addition, safe-haven appeal would likely add to downward pressure on bond yields.</p>
<p>Domestic challenges and policy reforms will play a defining role in relation to how sensitive African currencies are to US political developments in the near term.</p>
<p>Kenya and Zambia for example have made progress with reining in volatility in their respective local currency units by utilising the price mechanism rather than throttling forex supply – which incentivises parallel market activity – whilst setting a credible precedent that monetary policy will be utilised to discourage speculative long-dollar positions.</p>
<p>In turn, substantial barriers to capital flows and current account impediments continue to weigh on the largest West African economies, distorting benchmark pricing, suppressing economic growth, and undermining proper functioning of the monetary policy transmission mechanism, ultimately discouraging private flows.</p>
<p>In the face of these substantial domestic challenges, we do not see the primary source of risk to most African currencies and fixed income markets as stemming from US political dynamics. The latter will however increase the probability that certain African sovereigns may not be able to meet external borrowing targets. </p>
<p><img loading="lazy" decoding="async" src="/media/19257436/cnbc_trump_article_1.png" width="340" height="227" alt="CNBC Trump Article 1"/></p>
<p>﻿<img loading="lazy" decoding="async" src="/media/19257443/cnbc_trump_article_2.png" width="340" height="227" alt="CNBC Trump Article 2"/></p>
<p>﻿The medium- to long-term impact of Mr Trump’s presidency will only become clear once the dust has settled over the coming months. It is nonetheless prudent to briefly review the relationship between the US and Africa to identify some of the channels through which potential shocks could be transmitted.</p>
<p>Trade is one such channel to be mindful of, especially considering the president-elect’s protectionist stance in this regard.</p>
<p>Total trade between the US and Africa has declined sharply in recent years, mostly due to a decline in US imports from Africa – this is partly ascribed to the US shale-boom which reduced the need for African crude oil. In this sense, Africa has become less exposed to US demand. That said, a number of African countries still benefit immensely from the African Growth and Opportunity Act (AGOA).</p>
<p><img loading="lazy" decoding="async" src="/media/19257450/cnbc_trump_article_3.png" width="340" height="227" alt="CNBC Trump Article 3"/>﻿</p>
<p>A shift towards an investment strategy that is more inward looking – possibly to rebuild infrastructure and create employment as Mr Trump alluded to in the victory speech – may also hold direct implications for Africa.</p>
<p>According to the United Nations Conference on Trade and Development (UNCTAD), the US held the second largest amount of foreign direct investment stock in Africa in 2014. </p>
<p> The US also represents a key development partner of African countries. According to the Organisation for Economic Co-operation and Development (OECD), the US represents sub-Saharan Africa’s (SSA) principal benefactor in terms of bilateral official development aid (ODA).</p>
<p>A fiscal austerity drive could see the world’s largest economy rein in development aid, which would adversely affect countries such as Ethiopia, Kenya, Tanzania, Nigeria and the Democratic Republic of the Congo (DRC).</p>
<p>On the foreign policy front, many fear an escalation in conflict due to Mr Trump’s rhetoric regarding Islamic State, tearing up agreements with Iran, and renegotiating Nato agreements. But campaign trail rhetoric may in time give way to more level-headedness and American interests, and Mr Trump may backtrack on some of these statements.</p>
<p><img loading="lazy" decoding="async" src="/media/19257457/cnbc_trump_article_4.png" width="340" height="227" alt="CNBC Trump Article 4"/>﻿</p>
<p><img loading="lazy" decoding="async" src="/media/19257464/cnbc_trump_article_5.png" width="340" height="227" alt="CNBC Trump Article 5"/></p>
<p>﻿</p>
<p>We are moving into uncharted territory.</p>
<p>In the near term, the biggest risk relates to the impact of uncertainty on financial markets. That said, global financial markets have weathered a number of storms, emanating from different avenues, this year.</p>
<p>The surprise US election vote once again underlines the importance of strengthening fiscal and external buffers to limit spill-over to African economies, although we see risks to domestic financial assets as stemming primarily from domestic sources as opposed to external events.</p>
<p>That said, economies with little excess slack may necessitate a faster and more aggressive pace of monetary policy tightening to rein in growth in consumer prices and to anchor inflation expectations should exchange rate volatility gather pace.</p>
<p>Looking further ahead, while far from being insulated from US shocks via the channels outlined above, Africa may not be very high on the Trump administration’s agenda at first.</p>
<p>However, this is of little comfort, as adverse implications of US policy on key trading partners will ultimately spill over into African countries.</p>
<p>US policy towards China has to be monitored carefully moving forward due to the possible impact on demand for African minerals, investments from Beijing, Chinese loans for infrastructure development and the likely impact on commodity prices.</p>
<p>It is still too early to ring the alarm bells, but at this point in time it is hard to see any major positive effects on Africa stemming from the outcome of the US election.﻿</p>


OPINION: Will the US election outcome Trump Africa?

<p>2016 has certainly ushered in a healthy dose of political uncertainty and after the markets were caught off guard by the Brexit vote, a Trump victory has been perceived as a second strike for populism. There is a lot of pressure on the globalization status-quo, and because the transition to increased global trade was not efficiently managed, it contributed to a large structural displacement of labour and growing inequality. This popular discontent with wage growth, income growth and job loss has changed the political landscape.</p>
<p>There will be a big focus on the policy agenda under the Trump administration and the most obvious issue for emerging markets is trade, as Trump has vowed to renegotiate the North American Free Trade Agreement (NAFTA). We do, however, still await to see more details on policy implementation given that his campaign was light on specifics. Even with a Republican House and Senate, it is difficult to see what form future polices may take. It is worth mentioning that the president does have the authority to unilaterally pull out of NAFTA, which could see trading relations revert to pre-treaty norms.</p>
<p>Although Trump and Clinton stood miles apart on various issues, what they did share in common were views on infrastructure and defence. The US is likely to embark on an infrastructure spending program which will create opportunities for under-educated and lower skilled workers and could possibly ease pressures for protectionist policies.</p>
<p>In terms of market reaction, it was in line with expectations. A Trump victory has injected considerable uncertainty and volatility into the market. So far reaction has been swift with a selloff already observed in risky assets. US equity futures are down sharply, the JSE All Share Index was down over 2% in the first few minutes of trade. In terms of currency moves, the Mexican peso- which has widely been regarded as a proxy for Donald Trump’s chances- lost over 10% of its value against the greenback. The rand was not unscathed as the local unit came under pressure. Emerging market currencies will once again face some turbulence which may severely dent the return profile of local-currency bonds.  The market uncertainly has led to a rush into safe haven buying, as gold surged over 5%. However, on a whole, the markets initial reacted to Donald Trump’s surprise victory was not received as negatively as the Brexit vote.﻿</p>
<p> </p>


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IMF’s Largade warns of another financial crisis

IMF’s Lagarde reveals the unintended consequences of Brexit

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