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In the loop 24 November 2022

In the loop

Shireen Darmalingam

What you should know this morning:

  • The rand is stronger this morning, at R16.94/$, after closing stronger yesterday (R17.03/$*).
  • EM currencies were mixed yesterday; the ZAR (+1.4%), CLP (+1.3%) and PLN (+0.8%) were the biggest gainers; the THB (-0.5%), HUF (-0.3%) and CNY (-0.3%) were the biggest losers.
  • Asian equity markets are mixed this morning; the Nikkei and Hang Seng are up, while the Shanghai Composite is down. 
  • The Fed’s FOMC minutes of the November meeting conveyed that the Fed is poised to slow down the pace of rate hikes. 
  • The minutes noted that it would "soon be appropriate" to reduce the pace of rate increases.
  • Fed Chair Jerome Powell and several other policymakers signalled that the bank may be hiking the Fed funds rate by 50 bps at the December FOMC meeting.
  • Various policymakers have noted the peak rate as likely "somewhat higher" than previously anticipated. 
  • Several officials said that a slower upward pace would give the bank time to assess progress in the inflation fight.
  • Economists at the Fed flagged to the Fed that the chances of a US recession in the next year have risen to almost 50%.
  • This is expected due to a likely slowdown in consumer spending, the risk of further global economic setbacks, and further policy tightening. 
  • This was the first recession warning to the FOMC since the committee started hiking rates in March. 
  • Investors are likely to keep a close eye on the ECB MPC minutes due out today.
  • The minutes should offer some guidance on whether markets should brace for a 75 bps hike in December or whether the bank will hike by a lesser 50 bps. 
  • The Riksbank today is expected to hike the benchmark rate by 75 bps, to 2.50%.
  • The Turkish central bank too will meet today and may cut the one-week repo rate by 150 bps, to 9.00%. 
  • The bank has cut rates by 350 bps over three MPC meetings despite rising inflation.
  • The BOE’s Huw Pill noted yesterday that the bank needs to raise interest rates further to tackle inflationary pressures that are becoming increasingly domestic.
  • The BOE has already raised rates from 0.1% to 3% this year.
  • Inflation is currently at a four-decade high of 11.1% and more than five times the BOE’s 2% target.
  • Pill noted the main two drivers of rising inflation as being energy prices and job shortages.
  • Locally, the SARB will deliver its MPC rate decision today and is expected to have debated a hike of either 50 bps or 75 bps.
  • The October PPI is also scheduled for release today.
  • Eskom has implemented Stage 2 loadshedding until 4pm; Stage 4 loadshedding is expected at 4pm until 5am. 
  • Brent crude oil is down this morning, and up by 9.4% year-to-date.
  • The gold price is up this morning, and down by 4.1% year-to-date.
  • Brent crude oil is currently at $85.10/bbl; ($85.41/bbl*).
  • Gold is at $1754/oz ($1743/oz*).
  • SA CDS 249bps*, Brazil 261bps* and Turkey 555bps*.
  • Yields: US 10yr at 3.69%*, German bund at 1.93%* and SA 10-year generic at 10.78%*, SA’s R186 at 8.65%*.

* Denotes yesterday’s close. 

 Key events and data: 

  • 11h30: SA PPI (October)
  • 14h30: Eurozone ECB MPC meeting minutes (October)
  • 15h00: SA SARB MPC interest rate decision – 75 bps hike expected
  • US public holiday – Thanksgiving

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