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In the loop 19 May 2022

In the loop

Shireen Darmalingam

What you should know this morning:

  • The rand is weaker this morning, at R16.00/$, after closing weaker yesterday (R16.01/$*).
  • EM currencies were mixed yesterday; the KRW (+0.7%), RUB (+0.4%) and HUF (+0.2%) were the biggest gainers; the COP (-1.0%), TRY (-0.7%) and BRL (-0.6%) were the biggest losers.
  • Asian equity markets the Nikkei, Hang Seng and Shanghai Composite are down.
  • Russian GDP for Q1:22 undershot expectations and came in at 3.5% y/y from an increase of 5.0% y/y in Q4:21, due to war-related sanctions.
  • Both mining and manufacturing improved in Q1:22, though most of the data had been collected before the war.
  • Growth will likely plunge in Q2:22 as sanctions have intensified.
  • In fact, a deep recession is now expected for 2022 due to the restrictions on Russian financial institutions and companies prompting an exodus of foreign business interests.
  • The April ECB MPC minutes are due out today.
  • Investors will be looking for clues on expectations for the timing of the first interest rate increase as well as the possible number of hikes in the pipeline.
  • ECB President Christine Lagarde in the press conference after the MPC meeting softened her tone on policy tightening.
  • She has, however, recently expressed support for a rate hike in July.
  • This may now be supported by yesterday’s CPI which remained steady at 7.4% y/y in April.
  • SA has the 30th highest Covid caseload, at 3.908 million; 8,179 new cases were reported yesterday.
  • 18.01 million people, or 45.25% of the SA adult population, have been fully vaccinated.
  • The SARB is expected to hike the repo rate by a further 50 bps, to 4.75%, today. 
  • Indeed, upside risks from a weaker rand has increased in recent weeks. 
  • Additionally, food and fuel prices are up noticeably in the past few weeks.
  • The SARB will likely express concern about rising inflation expectations.
  • Brent crude oil is up this morning, and up by 42.0% year-to-date.
  • The gold price is down this morning, and down by 0.7% year-to-date.
  • Brent crude oil is currently at $110.55/bbl; ($109.11/bbl*).
  • Gold is at $1819/oz ($1820/oz*).
  • SA CDS 267bps*, Brazil 244bps* and Turkey 710bps*.
  • Yields: US 10yr at 2.90%*, German bund at 1.030%* and SA 10-year generic at 10.40%*, SA’s R186 at 8.36%*.

* Denotes yesterday’s close.

Key events and data: 

  • 10h00: Eurozone ECB current account balance (March)
  • 13h30: Eurozone ECB MPC minutes (April meeting)
  • 14h30: US initial jobless claims (14 May)
  • 15h00: SA SARB MPC interest rate decision – 50 bps increase expected
  • 16h00: US existing homes sales (April), leading index (April)

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