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Closing the loop 14 March 2023

Closing the loop

Shireen Darmalingam

Market highlights:

  • The rand is stronger at R18.07/$ (R18.19/$*) today; it ranged between R18.04/$ and R18.33/$.
  • The currency is above its 50-day, 100-day and 200-day moving averages (R17.66/$, R17.53/$ and R17.28/$).
  • EM currencies are mixed today; MXN (+1.4%), HUF (+1.2) and CLP (+0.0%) are the biggest gainers; the RUB (-0.7%), KRW (-0.7%) and INR (-0.4%) are the biggest losers.
  • US CPI came in at 6.0% y/y in February (matching expectations) from a 6.4% y/y increase in January.
  • The main driver of the increase in CPI in February was shelter costs.
  • On a m/m basis CPI increased 0.4% in February after having increased by 0.5% in January.
  • Core CPI also moderated, albeit slightly in February to 5.5% y/y from 5.6% y/y in January.
  • The elevated CPI data, a sign of persistent inflationary pressures, adds to pressure on the Fed to continue hiking rates.
  • However, investors have since the collapse of SVB cut US rate expectations at the upcoming meeting from a 50 bps hike in the Fed funds rate next week, to a possible 25 bps increase or remaining on hold.
  • US NFIB small business optimism index increased in February to 90.9 from 90.3 in January, albeit still remaining below its long-term average of 98.
  • Despite the improvement, the index remains subdued as the short-term outlook is dampened by high inflation and concerns over an economic slowdown.
  • The UK ILO unemployment rate remained steady at 3.7% in the 3 months to January.
  • Payrolls rose by 98k in February, exceeding expectations of a 68k increase and from a 42k (revised down from 102k) increase in payrolls in January.
  • Wage growth moderated to 6.5% y/y in the three months to January from 6.7% y/y in December.
  • Today’s data suggests that the labour market isn’t cooling enough for the BOE to pause on rates at the next meeting.
  • The BOE previously signalled that an end to its hiking cycle is in sight.
  • Financial market developments around the recent collapse of SVB may be at the forefront of the upcoming MPC meeting and may support the case for a hold on rates.
  • The UK CPI data for February is also scheduled for release prior to the MPC decision.
  • If CPI surprises to the downside, it may be enough for the BOE to pause later this month.
  • Locally, mining production contracted less than expected in January by 1.9% y/y, following a 3.6% y/y decline in December.
  • Production of gold was up in January while platinum output declined.
  • On a m/m basis, mining output overshot expectations increasing by 4.4% in January after having increased by an upwardly revised 1.3% in December.
  • Manufacturing production also declined less than expected in January by 3.7% y/y after having decreased by 4.5% y/y in December.
  • Production was up by 1.1% m/m in January following a 0.5% m/m increase in December.
  • Retail sales for January, due out tomorrow, is likely to have declined by 2.0% y/y; this follows a 0.6% y/y fall in December.
  • Eskom: Stage 4 loadshedding continues until further notice.
  • The oil price is down by 0.9% today, and down by 6.7% in the year-to-date.
  • The gold price is down by 0.4% today, and up by 4.4% in the year-to-date.
  • Brent crude oil is at $80.020/bbl ($80.77/bbl*).
  • Gold price is at $1903/oz ($1909/oz*). 
  • SA CDS is at 270bps (273bps*), Brazil 232bps (237bps*), Turkey 534bps (534bps*).
  • Yields: US 10yr 3.57% (3.57%*), German bund at 2.36% (2.25%*) and SA 10-year generic at 10.76% (10.78%*), SA’s R186 is at 8.37% (8.40%*).
  • The JSE ALSI is down by 0.9% today (-1.3%*).

* Denotes yesterday’s close. 

Key events and data:

  • 12h00: Eurozone industrial production (January)
  • 13h00: SA retail sales (January)
  • 13h00: MBA mortgage applications (10 March)
  • 14h30: UK Chancellor presents Spring Budget to Parliament
  • 14h30: US PPI (February), Empire manufacturing (February), retail sales (February)
  • 16h00: US business inventories (January), NAHB housing market index (March)

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