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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