How to analyse the Chinese yuan depreciation?

When combing through the past three months of financial market news flow you'd agree that the issue of China has gone very quiet lately which leaves investors wondering, why the sudden silence?

It's fair to say that Brexit and the rally in oil prices have dominated headlines for a while causing a disruption in the coverage on matters relating to China although it must also be said that a number of changes implemented by the Chinese government in terms of a lessening of financial market regulation have gradually been taking shape with the installment of a new Chinese Securities Regulatory Commission's chairman Liu Shiyu.

What we've seen evolve since Shiyu's appointment is a steadiness in the depreciation of the Chinese yuan against the dollar that eclipses the abrupt and sharp devaluation that took place in August last year that sent shockwaves through global markets.

The stark difference between the two events comes down to the fact that Shiyu has allowed the free market to decide an appropriate equilibrium whereas his predecessor, Xiao Gang, liberalised the market far too quickly that by the time it came to regulate the necessary parts in the market, participants saw this as signs of fear from the government.  

#China Onshore Yuan drops to 5.5yr low. pic.twitter.com/BGlT2q6YMz

— Holger Zschaepitz (@Schuldensuehner) June 28, 2016

Working hand in hand with the People's Bank of China (more commonly known as the PBOC) the CSRC has coordinated a greater certainty in policy going forward and in doing so has indirectly cooled down market fears from the height they had reached late last year.

This is yet another positive improvement stemming out from Chinese financial markets that will allow their securities to be included into global investment funds, thus broadening the diversification of investors in China.

However as much as China needs to be applauded with its efforts to align its own financial markets to a global benchmark, the actual depreciation of the yuan begins to tell a worrisome story of the future that'll have a profound impact on the global economy.

It says to us that foreign investors don't perceive a strong bounce in economic activity anytime soon indicated by the level of outflows that have exited the financial system this year alone. In the short term it may pull the brakes on the economy but over the long term it would certainly stimulate exports from China again.

Whether developed nations, who are suffering from severe currency appreciation, take kindly to this is another question altogether and will probably cause fingers to be pointed, increasing the chances of the world seeing a resurgence of currency wars.

Exclusive: China to tolerate weaker yuan, wary of trade partners' reaction - sources https://t.co/rVYUP3BnvT pic.twitter.com/10xVNrxSkj

— Reuters Top News (@Reuters) June 30, 2016

The EU will inevitably concede to keep the UK happy

In the aftermath of Brexit, financial markets seemed to have recovered relatively well considering the shock that was afforded to them after the referendum vote drew a heavy blow on many British politicians reputations after exuding confidence in the public accepting revised policies with the European Union that had been markedly improved during negotiations between prime minister David Cameron and EU leaders in February.

Needless to say the reform the electorate were looking for wasn't enough to satisfy their approval which they expressingly shown in last week's referendum that has place the proverbial cat amongst the pigeons leaving British politicians baffled over the results.

The empty void that's filling the political space in Britain at the moment will have a devastating effect on economic policies going forward with much of the attention being placed on finding resolution with the EU in terms of the UK's departure from the common market if and when it happens. As a result the likelihood of the economy falling into recession has become almost certain.

Not only will it fell down the economic fibre's that provide for a steady flow of activity but it will also impair the outlook of the Pound as many will expect the weak footing the British economy now finds itself in exacerbated by the possibilities of severed trade relations with the EU.  

ICYMI from @jsadinolfi: How the pound could hit history-making dollar parity by year's end #Brexit $GBPUSD https://t.co/w6Sx19JM4X

— Victor Reklaitis (@vicrek) June 29, 2016

Belief is siding with the conviction that politicians aren't willing to allow Britain to exit from the EU but rather use the vote to hold the European parliament ransom in an effort to obtain further concessions. If this happens to turn out the way it does it may become either a defining moment for the trade bloc or another disaster to add to the list of expanding mishaps that are wreaking havoc with their resurrections.

And as much as the EU attempts to stand in solidarity to show a brave face to the public and preventing to showcase some seriousness in their commitment to go along with the decision, they know fully well that the consequences of such a move has the power to unravel years of construction.

German Chancellor Angela Merkel's comments that there is no way back for the UK is flawed if we were to judge the EU's action when it came to enforcing penalties against Greece for failing to service its debt on the prescribed date and then dangled defiantly in front of its fellow members the protestation over austerity measures.

Although short term positive outcome was found, it was simply another let off from years of the same action that only serves to prolong the outrageousness of it all. Nothing makes the situation of Brexit any different from the rest of the other discretions made by members which is why we'll see the EU come to the party and give to Britons what is wanted, a control of immigration and the free movement of labour.

Technical Tuesday: Pfizer Inc.

Quarterly

Resistance of $36 is the line in the sand for this stock with a slow yearly build up to the level that was reached for the first time in the second quarter of 2015 after last touching those prices in 2004!!! The stock had been contained underneath its 13 simple moving average for some time after it had failed to poke above the $36 mark again during the early years of 2000 leading it into the crash of 2008 with bad sentiment attached to it. That served as a catalyst to drag the price lower which it did to just under $12 but subsequently marked the end of its negative spell.  

Since then we've seen a resurgence of price with an magnificent rally that trebled the company's value from lows to highs. The price has made steady progress with a firm uptrend that has held up well until hitting the resistance highlighted with a red horizontal line. The level identifies polarity between bullish and bearish sentiment as cited in the previous paragraph. 

A pullback away from resistance together with a strong bounce off the 13 SMA indicates good buoyancy remaining in the price. 

The 13 SMA provides a good measure of momentum with the recent quarterly retest a good indicator of whether buyers are sticking around in this stock which seems to be the case. Coupled with the MACD as well as the RSI, all signs point to the uptrend starting up again and possibly find the strength to break through the all important $36 level.    

Monthly

Looking closer at the monthly charts we see the strong uptrend seen briefly in the quarterly that's given bounce to the price in the last four months. This is an important factor since a healthy uptrend should be able to bounce back as strongly if not more so than the pullback. The MACD has remained above the zero line for some time indicating a good amount of bullishness involved in the stock. 

The yellow line which indicated the 13 SMA now represents the 50 SMA and in saying this the biggest clue to the direction of the trend. Price tested the moving average and spontaneously found vigour in the pathway upwards highlighting the buyer's willingness to snap up more stock at lower levels.

Besides this aspect, the placement of both horizontal and uptrend support congregated in the same area with the identical result suggests a number of trading systems had been anticipating the move which explains the hasty move we've witnessed.  

My expectation is we should begin to see a good fight for territory take place in weeks to come given the price isn't far away from $36. It'll be interesting to see how well it responds to levels above and on that price to ascertain whether we'll have a further up move on our hands. Considering the sector the stock resides in and the overall global economic outlook, it does seem poised to outperform.  

Political bamboozling is leaving the market confused

As the fallout over Brexit continues the British Pound fell to its lowest rate in over 31 years highlighting the extent of fear lurking in world markets at present. Politicians have come out in their droves after a weekend of crisis talks in an attempt to pour cold water on speculation that the UK leaving the EU would cause shockwaves for years to come while others warned the stability of the British economy has been compromised because of the vote.

Chancellor of Exchequer George Osborne failed to convince market participants of certainty going forward stressing the point that the "new"government to be announced after the Conservative Party conference will need to find ways of protecting the fiscal shape of the UK's budget policy.

There were also rumours afloat that Osborne was considering his political position at this current time knowing fully well that his administration of government's crucial ministry's affords him a large degree of political credibility should he wish to pursue the position of prime minister, something his remained tight lipped about.

Yet the political infighting isn't immune to the Tories only with the Labour Party using the event as an attempt to oust recently installed leader Jeremy Corbyn who's been in the firing line from members of his own party for not being vocal enough in his campaign for the "Remain" camp. A number of Labour MP's have resigned their position in an effort to shore up support against Corbyn.

One would've thought the Labour Party would've use the vulnerability of the Conservative's as a platform to work towards in eroding the strength of the ruling party however top leadership has left a lot to be desired.    

British Pound drops below $1.32, lowest levels vs Dollar since 1985. pic.twitter.com/oxrCoZo1CT

— Holger Zschaepitz (@Schuldensuehner) June 27, 2016

The fate of Bank of England governor Mark Carney now hangs in the balance as critics have taken a swing at his ability to manage the financial system by saying his commentary during the build up of the referendum was largely skewed in favour of "Remain"putting him at odds with situation that's turn itself on its head.

A campaign to rid the Bank of its governor is placing additional risk into the equation making it difficult for any market participant to find any type of optimism in the midst of chaos.

And who can forget the frontrunner to become the next prime minister of Britain Boris Johnson who's been singing like a canary bird in his response to questions about the manner in which he envisions the process of Brexit unfolding in the coming years as well as the type of policy needed to make the market feel certain of a stronger Britain again.

When asked about his concern about the current market volatility over the saga Johnson shrugged off any concern saying he felt the markets were pretty calm by his account, an ignorant and worrisome statement to make in the face of danger.

He went on to say that he would strive for the free trade agreement between the UK and EU to remain but said the free movement of labour would certainly become restricted to protect British jobs. If anyone wanted some sort of clue to the direction the UK could be headed in they would do well following Mr Johnson's comments closely.

In saying this it cannot be said enough that the current political whirlwind throwing the British economy into disarray has direct influence from the very policymakers who tried desperately to twist the arm of the electorate into believing whatever propaganda they thought would've appealed to them. The vote day is over, the results are in yet the politicians haven't the slightest idea on the next plan of action.

It seems as if the majority of British politicians aren't satisfied with the way polling has gone leading many to believe their could be a plot twist to a dramatic political play. What will it be?

We aren't certain of it yet which stokes the fires of fear even more at a time when politicians should be concentrated on finding a long term solution that doesn't hinder the outlook of the economy.  

Boris Johnson says UK will continue to have access to European Union's single market https://t.co/bbSub0AExp pic.twitter.com/DeRNoDoqAZ

— Reuters Top News (@Reuters) June 26, 2016

Brexit; What's the state of play right now?

One of the crucial lessons you'll ever learn when participating in financial markets is complacency is often caught on the wrong side of expectation. This is what many woke up to find this morning after the British public elected to leave the EU sending shockwaves throughout world markets who up until yesterday believed the "Remain" camp had done enough to secure a victory.

I'll be the first to admit that my intuition told me the possibilities of the UK leaving the EU was largely unlikely but I do believe that my opinion wasn't far off from the markets expectation in the midst of a global selloff felt today.

If financial market participants believed that they fully understood the psyche of the British voter or even that of a European voter this morning's shock decision has reminded them they're very wrong. It's as if there's a disconnect between what politicians in the EU are saying and what's really happening on the ground with the latter proving more serious in their convictions than the former.  

Nightmare Coming True for Stock Bulls Blindsided in Brexit Shock https://t.co/zctjqPDiWC @ALJax7 @JoeCiolli pic.twitter.com/XcuV9EYrRI

— Emerging Markets (@BloombergEM) June 24, 2016

Where to from here?

David Cameron's campaign to convince the British public of staying with the EU has irrevocably failed along with his reputation to lead the country forward forcing him to make a decision to step down from his role as prime minister that'll happen in October with no mentions of who might take over. The obvious candidate would be the current chancellor of exchequer George Osborne however this won't be a firm certainty with the Conservative Party reeling from split lines in support of Cameron's campaign.

One critic that stood out boldly was former Mayor of London Boris Johnson who added weight to the "Leave"camp that's successfully resulted in the desired outcome for their campaign but not without longer term implications for UK's leading political party.

Cameron's decision to stay on until the Conservative Party Conference was strategically link with saving the image of the party who did itself no favours holding such a vote that's ended up dividing the party instead of uniting it. It could also suggest that Osborne might not fancy himself sitting in Number 10 lamenting the defeat whilst preparing the UK for life after the EU considering he strongly favoured "Remain".

This all but guarantees Boris Johnson an open door to take over as prime minister should he want to which would be confirmed in his own decision to stand down as Mayor of London to concentrate his attention of campaigning for the "Leave" vote that's given him incredible momentum to snatch up Britain's highest political position.

But it won't be without its own problems with the party divided, the prospects of the future uncertain and the opposition rearing to take full advantage of the vulnerable state of the ruling party's woes.

Boris Johnson is probably going to be the next Prime Minister https://t.co/QjCf6NE145 pic.twitter.com/EhAQdJI06U

— The Independent (@Independent) June 24, 2016

Reconsidering Investment

Businesses in the UK will definitely be reconsidering their geographical location now that all ties between Britain and the EU are to be severed. The district served as an entry into Europe together with the benefit of operating in Pounds rather than Euros, producing a currency advantage if the Pound was weak.

They've come to rely on a significant amount of demand stemming from the EU region that'll now be subject to tighter border controls, import tariffs as well as delays in delivery all making matters complicated when they should be easier.

Needless to say the British public have come to recognise the grave risks becoming apparent in the EU with issues such as Greece austerity not being properly addressed, the Syrian refugee crisis benignly out of control and an insurgence of ISIS terrorism threatening to national safety.

Possibly the biggest risk of the Britain staying was the implosion of the Eurozone which seems to be drawing closer with every fresh unattended economic calamity. You could say perhaps Britons have voted to shield themselves from an inevitable crash when it does occur, a view that's not distant but possibly a huge risk to bank on given the importance of it's relevance and relations with the EU.  

More than 1,280 business leaders sign letter backing UK's EU membership https://t.co/e5XD51hpvD #EUref pic.twitter.com/60IaB70Wca

— BBC News (UK) (@BBCNews) June 22, 2016

Is oil showing signs of fatigue after an impressive rally?

Although oil prices has impressed many this year with a spectacular comeback from decade lows to a phenomenal rally that equated to almost a doubling of price in less than six months, its no wonder a close eye has been stalking price action of late as it nears medium term resistance that some believe could offer a harsh reality check for oil bulls.

Part of the reason we've seen a spike in price is due to the fact that US shale gas producers responded hastily when reasonable thought proved harmful in believing a rebound in price was nearer than fully understood in the dynamics leading down the value.  Needless to say the added economic deterioration in a number of OPEC member nations helped spur on a resurgence that's outshone returns of yesteryear.

We now have a scenario where oil prices are lofty enough to fulfill breakeven or even profit-making criteria for US suppliers to justify opening taps up again which is proving to be the case as found in the article below posted by the Economist.

 I've been saying this for a number of weeks combined with the price stalling at critical levels it could suggest that this sentiment is gaining traction amongst oil traders with a relative balance between buyers and sellers in the weeks gone past from a state where buyers far outstripped sellers driving up prices.  

Oil costing $50 a barrel is leaving American frackers hopeful https://t.co/gFQZbmWBPZ pic.twitter.com/2GdGAT19PW

— The Economist (@TheEconomist) June 23, 2016

As this is said further evidence shows that finance institutions that were once happy to accept the Cinderella prospects fed to them from producers seeking funding are stepping away from the market of lending to this sector with largely exposed European bankers opting to strave off capital hungry borrowers by refusing to issue new debt or alternatively finding buyers for these loans that have taken on additional risk.

What does this tell us?

It says European banks don't foresee the same optimal outcome that featured in the reason to grant long term borrowings to oil producers but instead of holding ground and patiently wait for the usual cycle to correct itself, this theory no longer stands as these institutions see harsher consequences if they were to hold these debt instruments for anytime longer otherwise why would they be selling?

To go further it also adds momentum to those who believe US shale producers will restart operations and possibly cause prices to slump again. The fact that European banks are doing this now paints the extreme optimism given to the situation.

Where does it leave us?

Quite simply the oil market will be left in a volatile oil market that will continue to exhibit wild movements in price until stability is found but even this is uncertain as of now. The flexibility of shale gas producers mean suppliers are able to shift between markets in search of profitable returns making equilibrium dependent on the surplus/deficit of either chosen produce.

Europe's banks dumping loans as they pare exposure to oil industry https://t.co/evIcU5EvkQ via @business @LCasiraghi pic.twitter.com/pVxui2BTLz

— Shelley Smith (@SLSmth) June 23, 2016

Softbank's president steps down due to uncertainty over future position

In a twist of events, president of Softbank Group Corp. and heir apparent CEO, Nikesh Arora has decided to quit the telecommunication and internet corporation saying he was at odds with current CEO, Chairman and founder Masayoshi Son over the time frame set for Arora to take over the reins. This has left investors puzzled after Son had pursued Arora in hiring the former Google executive with the specific intention of handing him the baton once he decided on a retirement age which was thought to have been next year at 60.

As fate would have it, Son has found new vigour and wishes to extend his stay on with the company he founded for just a little while longer stating his willingness to go on to lead the company for a further 5-10 years.

A number of issues stick out for me when speculating the rationale of Son's decision having actively seeked out a successor who mirrored his vision for the company, then stating firmly that Arora would be installed as the CEO when he departed only to backtrack on his plan which is tantamount to abandoning the goals of the company. Having run the company for the last 35 years you'd expect a large degree of attachment to it which probably explains the reason for staying on.

However this isn't a scene out a daily soap opera, investors don't care for sentimental feelings felt by a founder, they require results and the best possible one's at that. The company has made some smart investments in years gone the most recent being its tie up with Alibaba that saw it reap billions in profit after investing a few million in the early stages of startup.

SoftBank founder's heir apparent Nikesh Arora to quit https://t.co/SA13b3gZJi pic.twitter.com/dggK1JJwbA

— Reuters Top News (@Reuters) June 22, 2016

Last month saw it cashing in for the first time by selling down its stake in the Chinese internet giant from 32% to 28% meaning its lost its holding control on the company, a move that was necessitated as a strategic decision to eliminate high debt levels on its balance sheet.

One wonders whether the company is in prime position to take advantage of the plunge in valuations of functionable, non profit generating social media companies. If it was, Son would step aside and allow a younger person of an upcoming generation who understands the dynamics and potential of social media that possesses the aptitude to find the next big investment for the company to gain from, however not so with the current format of management that doesn't allow for new ideas to flow into the board room instead being dictated by the old regime.

Problem with the old regime is they don't yield to change, making it difficult for new opportunities to find their way into the existing business where you eventually find operations flogging a dead horse so to say.

A good leader knows when the time is right to step aside but this hasn't been the case with Softbank, a sign that the returns once offered to investors looking for great performance might become a thing of the past just as Nikesh Arora found out...

Travelling Technicals with Global Indices: U.S Dollar Index

There's no denying the importance currencies play on economic activity of the world with trillions of dollars exchanging hands everyday. The most prominent of all is the US Dollar that's been adopted as a standardised way of trading with other nations, easing the necessity to hold stock of a wide range of different currencies to facilitate trade. 

A fair amount of coverage has been given to the recent spike in the US Dollar against other major currencies as a result of the market heeding the call of the US Federal Reserve's promises to lift interest rates that have remained abnormally low for an extended period of time.  

If you've been watching proceedings closely of the progress year to date you'd noticed the divergence of trend emerging between the developed nations monetary policy in which the US has stood firm by its decision to see rates normalise whereas countries such as Switzerland, Europe and more recently Japan exploring the depths of interest rates by sinking them below zero. 

I thought a fair assessment of the situation could be put to the test with the analysis of the famed U.S Dollar Index which tracks a basket of a few of the largest trade partners currencies against the US Dollar. I stress a few because currencies such as the Mexican Peso, Chinese Yuan and many more are not included yet form a significant part of trade from and into the US. 

The currencies included; 

Euro (57.6%)

Great Britain Pound (11.9%)

Swiss Franc (3.6%)

Swedish Krona (4.2%)

Japanese Yen (13.6%)

Canadian Dollar (9.1%)

Monthly

A general expectation of the index is big moves occur whilst monetary policy is changing which doesn't leave too much surprises in terms of understanding possible directions. We saw that during the tenure of Ben Bernanke the index remained subdued up until the point when quantitative easing was weaned away.  His successor Janet Yellen was the first to make mention of hiking interest rates and in doing so set in motion a stampeded of dollar bulls who shot off on an impressive run.  

They managed to surpass the important resistance of 88 that marked out the end of the downtrend suggesting we would experience bullish overtone when tracking the dollar in the medium term. However what we've witnessed is a pause in trend, a correction in time rather than a correction in price that has trapped the index into a consolidatory range. 

This aligns with the Fed's indecisiveness or hesitancy not to hike rates at the moment which departs from their projected outlook they gave in December with the first increase. 

Staying range bound instead of pulling back indicates the market doesn't expect a shift in the Fed's policy anytime soon which gives the Fed an added bit of confidence in their ability of handling the outcome thus far. The price is sitting on support with the stochastic in an oversold position so I'd expect to see price moving back to the top of the range, if it doesn't major support will be found at 89 which could be a possibility if the RSI slips back under 50.

Weekly

On the weekly we see the same range bound formation but a number of indicators that signal contrary to the Monthly chart, the first being the 50 simple moving average (SMA) that exhibits a flat gradient and shows the price hovering below it.  The second is the RSI below the 50 for a consecutive number of weeks indicating a slowdown in momentum. Apart from these the only indicator that shows any kind of parallel to the Monthly chart is the stochastic that's approaching the oversold region. 

This makes our analysis difficult to speculate the direction of the next move however it should also be noted that longer timeframes hold preference over shorter ones. In saying that it would be expected that the support of the range should be strong enough to hold for the time being unless further evidence would suggest a degree of weakness emerging out of the US economy. 

Will the resignation of India's central bank governor weigh down on confidence?

Debate was set into action over the weekend when Central Bank of India governor Raghuram Rajan released a statement to his staff saying he would not be staying past the end of his first three year term that ends in September.  The move left investors wondering over who will possibly replace the former Chicago University professor who has been hailed as a beacon of light in a world of central bankers grappling to arrest rapid economic deterioration.

Rajan put to bed rumours of his unhappiness by indicating his reasons for leaving were based on his fallout out with government officials most notably after receiving a backlash of criticism from members of Narendra Modi's Bharatiya Janata Party (BJP) who called into question Rajan's true identity as an Indian citizen pointing to the fact he continues to hold a US Green Card and frequently visits the country to keep his residence active.

Although they conceded that Rajan's policy of high interest rates did attract much needed foreign investment as well as contained inflation that had gotten out of control, it also placed pressure on small businesses who aren't able to service debt with high levels of interest payments.

Yet between blurred lines it seemingly looks evident that Rajan's resolute promise to shape up Indian banks was the real reason to have him pushed out the job. The Central Bank of India set a deadline for banking institutions to "clean up"their balance sheets by making provisions for bad loans of which the most affected being stated-owned banks.

Rupee falls after RBI Rajan's surprise move to quit in September https://t.co/POpVu4Aj6m by @neha_5 and @Suvadc #Rexit #Rajan

— Reuters India (@ReutersIndia) June 20, 2016

The words "stated owned" says it all if we were to assess the success of bureaucratic administration of strategic organisations by government who find the convenience of using such enterprise as a means of political payback in terms of employment for loyal friends than meeting the true objectives.

At the end of last year I penned a piece highlighting the potential economic prosperity that beckoned for India with the promises of newly installed prime minister Narendra Modi who offered a lot if he could prove successful in passing through the reforms needed to elevate India's growth engine relative to its Asian counterparts China.

However as the clouds of doubt draw nearer this latest development delve's a heavy blow on Modi's aspirations whose government is increasingly foreshadowing previous regime's who instituted the same control measures to serve their own selfish ways.

The independence of a nation's central bank cannot be stressed enough when comparing the calamitous situation advanced economies find themselves in due to the lack of proper government policy aimed at correcting economic damage whilst opting to utilise the tools of "free money" to artificially hide the cracks of failure and then listening to the voice of reason from a policy maker such as Raghuram Rajan who couldn't be swayed to push a political party line by remaining unbiased in talking the truths that may at times been inconvenient yet needed to be heard and fixed.

It is indeed a sad day for proponents of monetary economics who've lost a champion of reason and replaced with a never ending trend of government meddled interference.

Fed's indecision rests on government's unwillingness to commit

Much to be expected, the US Federal Reserve held interest rates steady once again following a two day FOMC meeting that concluded on Wednesday. Fed Chair Janet Yellen cast a cautionary tale over the direction of the world economy with doubts raised whether the strength of US economic growth was concrete enough to sustain consistent setbacks seeping through from their counterparts in the developed world.

In Wednesday's article I said it was becoming difficult for the Fed to defend its strategy of keeping interest rates unmoved after issuing a guide, the so called "Dot Plot", in providing the market with some clarity of the pace that would be set in hiking rates throughout the next 3 years.

December's liftoff was disguised in confidence and perhaps even a show of arrogance to other central banks who've resorted to interest rates below zero in a last bid attempt to evade deflation. Needless to say the road to normalisation is fraught in containing the onset of policy decoupling and as a result has seen the negative externalities ploughing their way into US economy.

I am of the belief that nations, especially those who make up the majority of global GDP and thus direction, benefit greatly from policy coordination. We've witnessed this simply by observing the actions of central banks in developed nations feeding their economies with a mass money creating bonanza at artificially low rates.

You can't fault central bankers for finding the propensity to enact similar measures to their peers as it fell in line with global policymakers agenda of coordination. So where has it all gone wrong then?

Quite simply the scarcity of bold fiscal policies aimed at addressing failed systemic mechanisms that brought about the height of the financial bubble in 2008/09 as well as exploring new ways of implementing regulations with rigid framework to prevent the same from occurring again.

Yet we continue to see the ignorance of world governments, most importantly those representing the bulk of the world economy, in delaying the process everytime an economic inconveneince spoils the outlook of their nations economy by propagating voters ears with utopian policies.

Until such time we see these governments take radical steps to correct the mishaps hurting their activity, the longer the world will sit with the problem of low growth coupled with deflation.

The Fed’s missing dot belongs to the St. Louis Fed’s James Bullard https://t.co/detoU2K5GQ pic.twitter.com/Gin7suB1zv

— Bloomberg Markets (@markets) June 17, 2016

Will the Fed's hesitancy lead the market to see more risk?

Wait and see; that's the approach expected to be taken by the US Federal Reserve at today's announcement around its decision on interest rates that are yet to see further hikes after initiating the first such increase in rates in almost a decade following the Fed's December meeting. Since then the market has been largely affected with issues like China's economic growth stagnancy, a European refugee crisis and now a possible exit from the EU by the United Kingdom.

All these events have prevented the Fed from acting on their aspirations of seeing the Fed Funds Rate sit at a targeted level of 1.4%...pretty rich coming from a central bank that's been artificially fuelling asset bubbles since the introduction of Quantitative Easing.

Many at the time shot down the FOMC's projections by reiterating the weak global economic outlook that seemingly took hold of proceedings in the latter half of 2015 that was expected to last throughout the entire 2016. We've seen those conditions escalated in the first half of this year with advanced economies taking the front seat in terms of uncertainty, all showing signs of dragging down global growth.

5 things everyone will be talking about this Fed day https://t.co/BpeQaWs9ht pic.twitter.com/EGLOIU2ex1

— Bloomberg (@business) June 15, 2016

Brexit might be the excuse used this time but the Fed knows very well that if it continues to stall hiking interest rates the higher the likelihood will be for it to renegade on its normalisation policy.

The real risk presenting itself in the global financial system resides in the fact that central bankers are losing their influential hold on directing their economies by allowing world government's to fall back on monetary policy to reboot the global economy.

This no longer stands as a strong deterrent of deflation that poses a risk to an ever increasing debt mound that injected myopic confidence into a system with the results proving unsuccessful. It also shows a worrisome sign for the economic outlook that partly fed the miniscule economic growth numbers we've seen up until now.

Questions are being asked whether US Treasury's will follow in the footsteps of fellow nations such as Japan, Switzerland and now German in dipping below negative yields?

I don't think the answer to the question should be to speculate whether they could but rather what are the implications if they do and these nations should decide to start the normalisation process considering their bond instruments are amused "safe" and investors continue to flock into them to weather the financial storm.  

Update on Global Bond Yields as Global Growth continues to slow pic.twitter.com/h6jL2hcWlF

— Keith McCullough (@KeithMcCullough) June 15, 2016

MTN's commitment to Nigeria neither good nor bad

Just days after Africa's largest mobile telecommunication provider MTN agreed to pay a fine of $1.7 billion(roughly a third of the initial fine) to the Nigerian government the company committed to double capital spending in the next year as it attempts to fix the trust between itself and the government.

The Group's Nigerian business failed to disconnect unregistered subscribers before the given deadline prompting the Nigerian Communication Commission (NCC) to impose the maximum penalty per user after the cut off date equating to a fine of $5.2 billion.

Considering that Nigeria represents a hefty size of the Group's total profit and revenue, the company was backed into a corner with the range of options it could employ to eliminate the harshness of the penalty that would put a dent in the future outlook by heeding to the demands of the Nigerian government.

Of course government took this into account when they participated in negotiations given the horrid year they've experienced after attaining progressive and long term beneficial financial market improvements on home soil that saw interest in investments soar. The economic collapse suffered as a result of the slump in oil prices might've slowed down policy implementation but it certainly didn't stop policymakers from forging the way forward.

Recent news from the Central Bank of Nigeria expressing its intention to launch a dual-currency exchange rate is just one of the economic reforms government wishes to introduce.

The case with MTN is no exception with the Nigerian government using the fine as a tool to negotiate a local listing of the company's Nigerian operations to boost the image of the Nigerian Stock Exchange as a home for foreign companies looking to house their businesses.

However the manner in which they went about it may leave a lot left to be desired.

Bullyboy tactics might pressure big corporates such as MTN, who have plenty to lose, into agreements that fits the strategy of the government while disregarding the timing of such a move as well as the impact on its company, it would also make those contemplating investment think twice before doing so.    

MTN to 'significantly' boost Nigeria spending in 2017 https://t.co/ZIYJbkrpG5

— Fin24 (@Fin24) June 15, 2016

Travelling Technicals with Global Indices: Russell 2000

Today's edition of travelling technicals focuses its attention on the Russell 2000, a small to mid cap stock index that tracks the performance of the largest two thousand stocks classified within that sector. Besides the amount of constituents featured in the index the other major difference when compared to its closely watched counterparts such as the Dow Jones Industrial and S&P 500 is the perceived gauge of riskiness being invested into the equity market. 

An  uptrending Russell 2000 implies a risk on market is present as small caps are seen to be the riskiest form of equity investment with the general assumption that when the overall market has entered into a bull phase all tiers of equities should rise with the prevailing trend regardless of the perception of risk attached to the equity. 

Inversely a downtrending Russell 2000 would suggests the market foresees an increased level of risk introducing itself into the market with the need to find placement into "safe haven" instruments such as bonds. This point is important to our analysis today since it comes through prominently. 

Monthly

The lows registered during the Financial Crisis marked the bottom of the index and we've subsequently seen a nice support base formed off there with consecutive retests of the uptrend. The first retest proved critical in the bull run as the candle produced around the 50 SMA(Yellow Line) provided evidence of the sustainability of the rally. Once priced secured itself above the 50 SMA it set in motion an impressive upswing. 

This was followed by a collision into resistance around the 1200 area which saw a brief period of stagnancy in trend. Given the speed at which the rally take off the overall sentiment was a pullback was in order however this failed to materialise, instead price broke through the previous highs to much fanfare but fizzled out too soon. 

A correction in time rather than a correction in price has taken hold on trade over the last two years indicating a degree of caution entering the market. 

Price appears to be in the last stage of forming the topping technical pattern of a Head and Shoulders with a slight margin of points below the resistance of 1200. The stochastic is currently overbought shifting the bias in favour of the sellers here and the long term uptrend vulnerable of being broken. 

Weekly

Glancing into the weekly we see a different picture but sentiment still pointing to vulnerability. The series' of lower lows has been broken however considering the market is motionless. There's a Cup and Handle formation in place that reflects prices to ascend past the all time highs. 

It should be noted that the break to the upside of the cup and handle wasn't done with reasonable strength leading us to believe that the validity of the bullish signals could be false. 

If that were case and looking further on to the stochastic which is overbought and headed down, there is a good chance that we'll see the index come off in the weeks to come. Depending on the depth of the move downwards and the willingness of the buyers will ultimately determine direction. 

Prices below the 200 SMA(Blue Line) would strike a bearish tone given it sits close to the long term uptrend found on the monthly chart. If prices were to fumble around the uptrend instead of neatly posting higher levels then its safe to assume that the uptrend in place since 2009 has ended.       

Is the real risk to the UK Brexit?

A bumper filled month of uncertain events plus heightened fear of a Brexit leading up to the anticipated referendum vote in the UK in deciding whether to remain or leave the Eurozone all weighed down heavily on global markets at the opening of the weeks trade sending a strong signal that the volatility storm that gripped markets earlier in the year could be heading back into the fray.

Admittedly I haven't spent much time passing my thoughts on the possibility of a Brexit due to the unlikely nature of it happening, although that's what I thought. The British media are infamous for its sensationalist journalism in a bid to stir up the emotion of the public with outlandish tabloid headlines aimed at unraveling, discrediting and demoralising the person under siege.

One needs not be reminded of the shocking revelations that came to light when police investigated the now defunct News of the World and found brazenly unethical practices used by journalists to get a story which funny enough proved to be largely negative press for Prime Minister David Cameron whose links to editor Rebekah Brooks drew sharp criticism of his close associates.

Revealing the inner workings of the British media may have led to the demise of one of Britain's most read newspaper it didn't stop the many that escaped the spotlight and continue to operate in their provocative ways.

Surely this sets the tone for fear mongering polls suggesting a larger than expectant possibility of a Brexit  and thus fuelling the flames of uncertainty. The outcome is markets have fallen prey to the mischievous ways of the British press at a time when the vulnerability of the global economic outlook is far from its best.

Is a Brexit possible?

If you based your opinion on polls then maybe yes however if you drew attention to news items that matter most such as the recent local elections that failed to move the dial of fear or the resounding pleas of support for the "Remain" camp from world leaders including US president Barack Obama, German Chancellor Angela Merkel, Fed president Janet Yellen and many more all culminating into a conclusive view that a vote to leave would unhinge the progress made in the UK economy in recent years, then it would seem as if the choice to exit the agreement with the EU may be unfounded and unwise.

Britain's decision to remain, which I still believe to be the likely outcome, will go down to as the biggest shortsightedness of risk in present times with the focal point far off from the real risks, the perpetual economic and debt crisis that evolves in Europe.      

Pound tumbles on Brexit fears as speculators double down on drop https://t.co/YZDus2eXC2 via @anoojad @NettyIsmail pic.twitter.com/OfzYzG6x3U

— Bloomberg Markets (@markets) June 13, 2016

Are negative yields taking over the bond market?

As chaos begins to descend into financial markets again after a hiatus that saw oil prices bounce strongly, the Chinese growth dilemma take the backseat and central bankers announcing additional rounds of quantitative easing measures to be put in place, the outlook remains hazy with investors increasingly placing their bets in the least perceived riskiest asset namely government bonds in the hopes that it could yield them some sort of meager return that's been absent in portfolio's in the last year.

Subsequently the demand for high quality government bonds issued by nations such as Japan, Switzerland and now Germany has been driven so far that yields have turned negative, a first time phenomenon that's left many puzzled.

Critics of the current monetary view of Negative Interest Rate Program (abbreviated NIRP) by advanced economies such as those mentioned above have spoken out at arm's length about the distressing outcome these nations could be headed into if they don't allow sanity to prevail in realising the limits of monetary policy having reached an irrevocable end at the extreme side of the spectrum.

A staggering $10 trillion bonds at face value currently trades underneath a yield of 0% which has been steadily rising as the situation spins out of control compelling investors to seek out riskier alternatives that hardly leaves much comfort in its placement. Parlously slated assets that are starting to feature in portfolio's include long dated and junk grade status bonds.

In the case of the former, investors feel it justified to give up the opportunity of lending capital out in the short term just for the opportunity to earn a positive yield!!! Furthermore the implication of such belief leads one to ponder the ramifications that will be felt when desperation no longer holds appropriate and the shift in policy direction takes hold, amounting to immense losses suffered as a result.

For all its worth if one outcome were to come of the present and the future it would be the underlying fact that no single controlling economic policy mechanism is able to steer forth the weight of economic activity without the assistance of the other. It would also stress the need that government's inaptness to respond in a constructive manner doesn't exist under the premise of socialist ideology instead working on a fallacious conception that infinite quantities of money are available at hand to allay the harshest economic circumstance which couldn't be farther from the truth.

The global economy is slowly metamorphosing into the ugly looking monster that reared its head in the Financial Crisis however this time the consequences will be worse.      

Paradigm shift!
Government bonds: 'return-free risky assets'! pic.twitter.com/CPRHqj0a6f

— jeroen blokland (@jsblokland) June 10, 2016

Oil prices might be strong but for how long?

Nobody can deny the resurgence of interest commodities have found this year with two of the standout cases being Gold and Oil. Both have underperformed in prior years but oil has managed to steal the attention of most market participants who were entertained and amused by the price wars initiated by OPEC on US shale gas producers.

Only last week we heard a presumptuous tone being struck by none other than de facto OPEC leader Saudi Arabia in a bid to smooth over cracks that have appeared prominently in recent months as a result of its autocratic manner in directing the collusive oil body over the last two years.

Riyadh's victory at all cost approach and one track mind focused on nothing besides destroying its US competitors has meant a number of OPEC members being inflicted with catastrophic economic circumstances that's produced shock into the system and weakened their abilities far beyond conventional means of repair.

Needless to say the vulnerability OPEC nations are experiencing is fully understood and felt by US shale gas producers who've received a similar barrage of doubt over their valuations and ability to pay down debt piles that have been accumulating. This kind of negative sentiment around US producers has afforded Saudi Arabia the chance of reinforcing the belief to its colleagues that it was right in its methods of eliminating competition of which it took full advantage of during the bi-annual OPEC summit held in Vienna last week.    

US oil production increases for the first time in months. https://t.co/XZRZSvBsPk $USO #OIL pic.twitter.com/4OjMTtlWtO

— Equity Clock (@EquityClock) June 9, 2016

Digging deeper into the mechanics and events that led to oil prices almost doubling since the lows of January tells a different story though.

Indeed US shale gas producers were forced to turn off or temporarily close wells due to incurring losses and low prospects of witnessing long term stability in prices however the remaining producers who had survived holding off creditors knocking at the front door have done so because of their quickness to adapt to the situation better than their soured counterparts.

This has meant looking for alternate uses for shale gas apart from converting it into oil-based products for the motor industry that too went through its own crisis by almost reaching full storage capacity. Again this came down to producers attempting to hold out for as long as possible in anticipation of a price rise in oil that didn't materialise until now.  

Those producers who opted to produce liquefied natural gas (otherwise abbreviated LNG) haven't yielded the desired outcome they'd expect but they did alleviate the supply pressure on oil production globally by shifting its product into a new market.

#WTI #Oil reaching 1 year resistance...will it punch through ?#Commodities #OPEC pic.twitter.com/pBcARpUXfo

— Quinton Mendes (@CadeTradeR) June 9, 2016

The result???

A bounce in overall oil prices and a fresh supply glut formed in LNG markets who've been suffering the same fate as most commodity prices; battered, bruised and unloved. Given the pronounced resurgence in the commodity sector it suggests that this particular market might have to endure the troubles of a downturn a little while longer unless a way is found to clear the glut in place.

Considering oil prices have doubled in six months, the possibilities of increasing margins by opting out of producing LNG and reverting back into oil are too tempting for US shale gas producers to ignore.  Added that LNG closely tracks along the prices of oil yet in present times a divergence has developed by a far enough margin to push US producers to reconsider their end product, I wouldn't be surprised to see US production starting to grow once again.

This will result in pressure being applied to the oil price once again that'll contain the impressive rally we've witnessed so far and perhaps blow out the ember of hope many oil bulls may have had in believing that the current surge in prices characterizes an element of sustainability.

Short term product flexibility is the competitive advantage of US producers and I can't see why they wouldn't take control of that leaving Saudi Arabia with a fresh dilemma to deal with in proving that the assertion they made in implying their policies fixed the stability of oil prices rests on rickety foundations.

Is the S&P 500 ready to rally past its all time highs?

Wealth management firm Merrill Lynch believes the lengthy period of time the market has been waiting to register fresh highs on the S&P 500 is a bullish scenario for investors. They went on to say that investors will be hesitant to chase the market back into the previous highs but if it were to happen it would definitely restart the bull run that's been firmly in place since 2009.

In yesterday's blog I broke down analysis of the S&P 500 on a quarterly and weekly basis saying the chart exhibited a few elements that would suggest an upward move on the way however I also warned that the current poor economic outlook was affecting sentiment and could possibly unhinge any promise coming from the rallies.

A number of uncertainties continue to haze the long term view with the impending British referendum "Brexit" sending volatile impulses through the global financial system together with the experimentation of negative interest rate policy in both Japan & Europe as well as dim economic activity out of US that's strong enough to showcase as one of the few countries in the world growing but weak enough to give way under the weight of an interest rate hike.

It seems as one economic calamity falls off the radar screen another appears hastily to fill up the void with panic instead of settledness. How long can this farce last? Long enough for many to believe there's still a chance to see an uptick in stock indexes around the globe. With every wake of additional stimulus added to an existing program the influence of monetary policy diminishes, exposing financial markets to the wrath of fear with no controlling body able to stop it.

Ironic that this would come from a firm that became so blinded by its own greed only to be burnt severely in the midst of the Financial Crisis and subsequently saved from the shame of bankruptcy by the Bank of America who found themselves forced rather than considered to act. One would've thought the painful lesson taught during this close encounter should have reinforced the idea that caution might be the best approach when evidence shows the counter to your beliefs.

Merrill: Long pause healthy for bull market https://t.co/OAcCpAul5W via @CNBCPro

— CNBC (@CNBC) June 8, 2016

Nigeria's pledge to float currency is a false start

In late May the Central Bank of Nigeria Governor Godwin Emefiele told market participants that the bank was preparing to remove the peg it had against the US dollar because it could no longer support its currency, the Naira, after haemorrhaging foreign currency reserves due to the slump in oil prices that created a vacuum between the funding and disbursements in its trading account.

No date was given at the time however Emefiele said it was "a matter of days" before the country would introduce a flexible exchange rate policy with authorities at work to make it happen. This was in sharp contrast to what Nigerian President Muhammadu Buhari had envisioned being a fierce defender of the peg in an effort to shield his citizens from abnormally high inflation.

It now turns out that the Nigerian finance ministry is evading the implementation of such measures by stalling investors and refusing to give a set date to when they can expect the new policy to take effect.

What looked to be a positive reform in acknowledging the faults of the current system and proposing an overhaul of the central mechanism that allows foreign trade to take place has effectively shown the differing views between the CBN and the Nigerian government.

Firstly investors detest political squabbling, putting it down to the creation of uncertainty in the pathway moving forward with crucial policy changes needed to revitalise the economy. If an uncertain environment exists investors opt to sit on the sidelines.

Added to this the Nigerian government's bureaucratic processes, which must be said isn't isolated to this country only, strangles the progression of its economy and the need to realise that it cannot be a fixture when attempting to attract investors to its shores becomes more evident when an outcome such as this begins to take shape.

Lastly it highlights the government's underestimation of the enormity of the task which doesn't bode well for confidence in their ability to manage the domestic financial system, generating further risks that require more return to be poised to invest in the country, a situation that only gets compounded by the current economic downturn.  

#Nigeria tells investors it'll make a #naira announcement within weeks. https://t.co/WCsodYXnOd @LyubovEmWorld pic.twitter.com/B8liDMMR2o

— Paul Wallace (@PaulWallace123) June 8, 2016

Travelling Technicals with Global Indices: The S&P 500

If there was one index that summed up market sentiment in the United States it's the S&P 500 that tracks the price movements of the largest stocks listed on the New York Stock Exchange and the NASDAQ with a broader representation of the overall equity market compared to its counterpart the Dow Jones Industrial Average.

Although it would be cumbersome to list every company featured in the index (as there are 500) its safe to assume that the most prominent blue chip co's are all represented in the index. The convenience of utilising an index this big is because of two distinct characteristics which are;

• Companies with large market capitalisation are more parallel in terms of their price movements to the economic cycle than smaller companies making the interest in them much higher than the latter. 

• The variety of sectors featured in the index gives investors a diversified choice when analysing the overall market giving a better indication of the sentiment in the entire market. 

Another stark contrast between the S&P 500 and the Dow Jones Industrial Average is the manner in which the weightings of the index are calculate with the S&P 500 being free-float market cap weighting and the Dow Jones price weighting granting more flexibility to the former when it comes to changing market dynamics and relevance.

Quarterly

The S&P 500 had been range bound for 15 years prior to breaking upwards and setting up a short spurt to the round figure of 2000. After reaching that level the price moved slightly higher before becoming unstuck at 2100 where its been oscillating between that resistance and support found at 1900 marking a 10% difference from the highs to the lows. 

At one stage during the last four quarters, the lows at 1900 were taken out and fresh lows were registered at 1800 that signalled the bottom of the short term pullback. 

Overlayed on top of the logarithmic price chart is a 13 SMA that's used in conjunction with the MACD to measure the strength of momentum that might remain from the upside break around 1600. The directionless motion the index has headed into allowed momentum traders to climb on board when the price fell below the moving average but the confirmation from the MACD is yet to give the green light. 

Two scenarios may come in the following quarters that'll define the direction of the index in the medium term. 

1. Price continues to hang about current levels until it finds enough momentum to finally break higher passed the previous all time highs translating into the continuation of the uptrend and onwards to higher records. 
2. Momentum buyers who took their chances underneath the 13 SMA get caught on the wrong side of the trade if the prevailing sentiment of a weak outlook remains. This will lead to the price dragging itself down back to the lows of 1800.  

Those traders are currently in the money but with no certainty when volatility could pick up they'd be compelled to tidy up their positions by profiting from the presumptuous trend that feels in jeopardy rather than it does steady. If 1800 were to give way expect a quick move materialise to 1600. An important note should be made that the figure on and below 1600 has been mentioned a few times by a number of large investment houses as a possible scenario of direction. 

Weekly

On the weekly we see the support above 1800 is neatly formed whereas the resistance towards the all time highs is difficult to trace in. This could possibly hint at nervousness of driving the price higher on a lack of fundamental evidence that points to a stronger US outlook. The 50 SMA is flat and has been so for an extended period of time pulling the sting from the tail of a potential upside rally. 

However the RSI does exhibit a feat of lying above the 50 level for a consistent period of time, a situation that hasn't been present for over a year as can be seen by the oscillation above and below with no degree of steadiness in a particular area. 

Indication could imply there might be a build up of momentum in the processes and we could see a surge higher but for now its more of a wait and see approach. There are still a number of outstanding technical points that need to be tested before we can feel certain over the direction of the index.  

Chinese equity valuations still don't buoy confidence

As the world's attention turns directly towards the trouble brewing under the surface of developed nation economies, the hype that once set panic through the entire global financial system over the stock market bubble that had been built into the Chinese equities a year ago seems to have faded with the focus shifting to more pressing risks such as the impacts of negative interest rates, Britain's exit from the Eurozone and the slowdown in economic activity in major world economies.  

However when weighing up the high valuations attached to global equities in comparison to the world's overall future economic perspective, the concern is warranted but more so when you consider that Chinese equity valuations are three times higher than their world peers!!!

Furthermore given the surge in volatility that's surfaced in the past year you'd think it would've had some profound effect on scaling back valuations to within reason but yet this hasn't been the case with the measure remaining largely unscathed after the brutality of market moves.  

Suggestions imply although market concerns over developed nations takes centre stage presently, the mitigation of fear won't be offset if their leaders are able to avert a crisis of sorts, instead it provides market participants with further impetus to add more pressure on future certainty.

The belief that China's woes will simply diminish is a fate many have fallen ill too in the past and the risk of the same happening is being stoked by the fact that attention drawn on the matter doesn't feature more predominantly as it should. Perhaps it could be market priorities set on finding comfort in the certainty of developed nations which has been apart of market norms for some time however the idleness of dealing with the issue makes me start hearing the sounds of a tick-tock clock.

Even a world-beating selloff can't make Chinese stocks cheap https://t.co/Xa2O7fqEd1 pic.twitter.com/sT83785mim

— Bloomberg Markets (@markets) June 5, 2016

Waiting for the inevitable: The pending case of South Africa's junk status

Nothing comes closer to my heart than my home country South Africa yet it pains me to underscore the seriousness of the morbid outlook being projected in the face of a potential downgrade of the nation's investment quality status to junk by Standard & Poor's that'll be announced on the 3rd June 2016. 

Much of the hype built up to the event has been debated ad nauseum with the conclusion all pointing to one person, Jacob Gedleyihlekisa Zuma being named the chief culprit in tarnishing the image of the country after a series of scandalous cases concerning the abuse of power questioning his true intentions of ruling the nation. 

Zuma's insatiable appetite for self-wealth creation from state coffers to feed his own desires as well as that of his family and close business associates have tainted the integrity of the fierce struggle movement, the African National Congress, who continual find inconsistent justification for his despicable flouting of the South African Constitution whose signatories include the late former president Nelson Mandela.  

Yet the issue over the manner in which Zuma and his party have mismanaged the economy to such an extent that it would send all investor rationale over the edge into a height of panic around the stability of certainty has sent rating agencies effecting pressure on government to restrain the bloating wasteful expenditure with none example closer to the point than the case of Nkandla where the state spent R246 million "upgrading security" at the president's personal residence. 

The farcical impropriety that ended up in a four year legal battle that saw the president and his merry men of banditing cronies vehemently deny any liability on the part of the mysterious "Number 1" eventually saw the Constitutional Court weighing in by ruling that Zuma had failed to uphold his oath of office by placing his own interest ahead of the country's.      

Did President Jacob Zuma find it in himself to face the shame of dishonouring his nation in failing in his duties to uphold, defend and protect the Constitution? Not at all, instead he found it appropriate to only apologise for the transgressions of his Cabinet instead of stepping down. 

Furthermore his attempt to capture State Treasury fizzled out miserably when he fired then finance minister Nhlanhla Nene and replacing him with a political puppet, Des Van Rooyen. His own party showed eerie signs of distress when they called an emergency meeting and insisted Zuma reverse the decision he had made due to the consequential financial outflows that began as a result of such a disastrous move. 

All this didn't come about in a matter of months, no this notion has been in momentum since Zuma took office in 2009 and slowly gathered speed with every waking scandal he becomes embroiled in. Only a year and a half ago I wrote an article expressing signs of declining confidence in government with the departure of two key decision makers, that being Gil Marcus who didn't renew her contract as the Governor of the South African Reserve Bank. 

Marcus had been critical of the government especially on the matter of Marikana, an area in the platinum belt of the country, where miners had tragically lost their lives at the hands of the police force. However her cries of warning were faint when reaching those that it mattered most too and the belief that her influence had no bearing on the course of the country deemed her position ineffective. 

Then came the shift of Pravin Gordhan from the ministry of finance to co-operative governance after Gordhan found no pleasure in appealing to fellow cabinet members to tighten their belts and cut back on wasteful expenditure the gravest insult being the Nkandla debacle that became the final straw for Gordhan who prides himself on honesty. Unable to bear the tirade of anger from both the South African public as well as members of the opposition party, a suitable ministry was found for him until that rug was pulled up from underneath him. 

Gordhan was installed for a second time to head up Treasury after the meddling ways of Zuma caused his own party to force him to remove Van Rooyen and place Gordhan in the position being a man of strong morals and values that would hopefully reinforce the ruling party's commitment of a concrete financial system that encourages foreign investment. 

But the move didn't come without a dilution of Zuma's power who immediately became threatened by Gordhan's appointment with top directorate of organised crime, the Hawks swooping in with allegations of an illegal formation of a rogue group to infiltrate top earners. Gordhan's name conveniently found its way onto the list and possible charges brought to the public's attention all to discredit him. 

Six months into his new tenure and the political boxing match between the factions of the ruling party and that of a member tripartite alliance, the South African Communist Party, is yet to reach a boiling point with both sides steadfast in buckling the others attempts to grab hold of power. 

What was Gordhan's factions response to trumped up charges against their chosen defender? 

Revelations that the Gupta brothers, Zuma's closest business associates, had a say in the appointment of Zuma's own cabinet with the most damning allegations coming from deputy finance minister Mcensibi Jonas who said he had been offered Nene's job before he was fired! Surely this would be the dagger in the president's power. 

Never.

Our beloved "Number 1" used the opportunity to intensify the pressure on Gordhan by the Hawks eventually yielding enough concessions from his opponents to once again find inexcusable propaganda by dropping an ANC internal probe into the matter. 

There's no hiding from the facts that South African politics closely resembles that of a soap opera that's filled with as much outrageous storylines as it does any form of hope, it does also point to a poignant outcome that's sure to strangle investor confidence in the country if nothing is done to stop its destructive ways. 

The more evidence that comes to light showing how Jacob Zuma is successfully funnelling away state resources into his personal endeavours of enrichment with no ramifications the further distant the goals of investment separate themselves from the greater good of the country. 

Investors elementary requirements might be to return a positive yield in offering capital but that becomes clouded when considering the long term steadiness of funds when a constant force of dispossession takes place from citizens to a single individual. The net may have been cast to an intermediate structure but nothing says it can't grow wider with all the scandals and political paybacks owed after what can only be described as disgraceful abuse of power.     

    

In saying this the question whether South Africa gets downgraded from investment grade to junk no longer stands but rather that of when the downgrade will happen with time getting nearer. 

South Africans have yet to fully realise the devastating financial impact that can still be felt if the political infighting doesn't find resolve and I'm afraid to say judging by the developments that have been allowed to take place it doesn't seem like they'll be solved anytime soon. Hopefully it isn't too late because this country we call home might descend into a scavenger's paradise, ultimately a failed state.  

Will Saudi Arabia's gesture of goodwill be received well by OPEC?

OPEC's bi-annual meeting kicked off today in Vienna with market participants not expecting any specific resolution to be passed after the previous two meetings drove divide between members that deemed the collusive oil body defunct at controlling the price of oil.

At the head of the division is de facto leader Saudi Arabia whose steadfast conviction in its belief that a lower oil price would drive away competition from new entrants that found opportunity in the US in the form of shale gas. However the voice of concerns from other economically vulnerable members it tried to brush aside is coming back to haunt it with the latest meeting demarcated as crucial if it wishes to amend broken ties that have the potential to unseat Riyadh as a major influence in the oil market.

The obvious casualties have been Venezuela and Nigeria who were the first to propose an emergency meeting called before the planned December 2015 conference appealing to Saudi Arabia to pull back from the current stance due to the harmful effects it was having on both their economies. It was even suggested that Russia join the meeting in a hope that the combined effort that totals roughly half the world's oil output would drive the desired move in the price of oil most members wished to see.

These pleads fell on deaf ears as Riyadh was firm on its decision, the first signs of the fractious relationship showing cracks within the organisation. At the time I had said Saudi Arabia was risking the economic prosperity of its member countries in favour of its own agenda and the result would likely cause involuntary political uncertainty due to headwinds faced by lower oil prices that only served to exacerbate a difficult economic burden on their citizens.

As developments have taken shape since that failed meeting in December, the turmoil has grabbed hold of both countries and as predicted, political instability has given rise to heightened risk by investors who put fate in their chances in those countries. This has left a considerable amount of acrimony in the aftermath of crippled economies whether or not both these nations try to veil their ill-feelings to hide signs of disunity.

Vulnerability of alliances is what will press Riyadh to relook at its diplomatic position over the last year of dealing with OPEC members with this case being the perfect example of how strong bonds may turn into weak reliances if every nation's expectations aren't met leaving the door open to possible promises being made by other ambitious members, namely Iran.

Petro-Diplomacy in Vienna: Can #SaudiArabia Mend #Opec Divisions? https://t.co/6Ca2fn0R9p via @business #oil #OOTT

— Javier Blas (@JavierBlas2) June 2, 2016

Which brings me to the next contentious issue inside OPEC right now and that's the rife between Saudi Arabia and Iran with the latter refusing to participate in an agreement that would see oil output frozen for a set period of time. The refusal comes after the Arab nation was unshackled from trade sanctions that prevented it with selling it's most popular product, oil, to other countries in Europe and the US, the bulk of its customers.

Being unable to lift output during times of sanction, Iran feels its done enough for OPEC to warrant its exclusion from the deal which it sees as a hindrance to its economic recovery rather than a benefit. Notwithstanding this argument Riyadh has come out strongly against its non-compliance saying it will not agree to any plans unless Tehran is seated at the same table and reciprocates causing immense tension between the two.

But once again, Saudi Arabia fails to take into account the economic misgivings of other member nations and instead places its own prosperity in front of everyone else. The trend of continually overlooking economic dilemma's without any sympathy is starting to paint them as dictatorial in their rule of the collusive agreement which is bound to come under some sort of resistance now or in the future.

It's effort to smooth over ties at the current meeting won't yield much more than a mere acknowledgement of a gesture but it certainly doesn't undo the calamitous outlook some of its members face because of its arrogance. Recent comments made by the deputy crown prince Mohammed Bin Salman Al Saud would certainly speak to the contrary when looking for genuineness of extending a hand of goodwill when you weigh up his threats to drastically increase Saudi's oil production to undercut Iran's plans to expand its own production from record lows.

The timing of the move should be scrutinised as Riyadh is simply trying to cover up its failings by projecting a victory of its belief by showcasing the mammoth rally experienced in the oil price which is far from the doings of its actions.

Saudi Arabia should be cautious in its approach to how it intends of resolving disputes amongst members especially those who take issue with itself. All it needs to be reminded of this is the deputy crown prince's plans to make the Kingdom less reliant on black gold and diversified in other areas of investment. The retaliatory backlash it could face from within its own OPEC membership could derail those plans altogether and place it in its own dilemma, a fate I can't think it envisions itself in.