In the loop 01 June 2023

In the loop

Shireen Darmalingam

What you should know this morning:

The rand is stronger this morning, at R19.72/$, after closing weaker yesterday (R19.77/$*).
EM currencies were mixed yesterday; the PHP (+0.3%) and PEN (+0.1%) were the biggest gainers; the TRY (-1.6%), COP (-1.3%) and CZK (-0.9%) were the biggest losers.
Asian equity markets the Nikkei, Hang Seng and Shanghai Composite are up.

US debt ceiling Bill: The House of Representatives have advanced a Bill to raise the US debt ceiling.
This prospective Bill must still pass the Senate before it is signed by President Joe Biden and put into effect ahead of the deadline next week.

Fed Governor Philip Jefferson commented yesterday that the Fed would be inclined to keep interest rates steady at its next FOMC meeting 13-14 June.
This would be to give policymakers more time to assess the economic outlook after several rate hikes.
However, such a decision (a pause) wouldn’t necessarily mean an end to the hiking cycle.
Jefferson noted that “skipping a rate hike at a coming meeting would allow the Committee to see more data before making decisions about the extent of additional policy firming”.
These comments come days after several policymakers have signalled that rates are likely to increase at the upcoming meeting.
Philadelphia Fed President Patrick Harker also supports the idea of the Fed skipping an increase at the June FOMC meeting.

The US private sector ADP employment report for May is scheduled for release today.
Private sector payrolls are likely to have increased by 170k in May, after having increased by 296k in April.
The non-farm payrolls report, scheduled for release on Friday, is expected to show a slowdown in the pace of hiring.

China’s Caixin manufacturing PMI increased to 50.9 in May, from 49.5 in April, against expectations for the gauge to remain below the 50pt benchmark line.
The data contrasts with the official data which showed a slump in factory output in May.
The mixed data suggests that China’s economic recovery remains uncertain, and further evidence is needed to assess the outlook.

Eurozone inflation, due out today, is expected to have moderated sharply in May.
CPI is likely to come in at 6.3% y/y in May after having increased by 7.0% y/y in April.
On a m/m basis, CPI is expected to have increased by 0.2% in May following a 0.6% increase in April.
The Eurozone unemployment rate, also due out today, is likely to have remained unchanged, at 6.5% in April.
The UK’s BOE will keep a close eye on the latest Decision Maker Panel survey to gauge inflationary pressures.

Locally, the BER manufacturing PMI for May is expected to have slipped to 49.2, from 49.8 in April.
The May Naamsa vehicle sales data is also on the cards today; sales are expected to have declined by 1.6% y/y, after having fallen by 0.2% y/y in April.
Stats SA releases the electricity production and consumption data for April today.
Eskom: Stage 4 loadshedding is currently in place until 4pm; Stage 6 loadshedding follows at 4pm.

Brent crude oil is currently at $72.86/bbl; ($72.66/bbl*).
Gold is at $1963/oz ($1965/oz*).
SA CDS 319bps*, Brazil 212bps* and Turkey 605bps*.
Yields: US 10yr at 3.66%*, German bund at 2.28%* and SA 10-year generic at 12.12%*, SA’s R2030 at 11.29%*.

* Denotes yesterday’s close.

Key events and data:

10h00: Eurozone HCOB manufacturing PMI (May – final)
10h30: UK net consumer credit (April), S&P Global/CIPS manufacturing PMI (May – final)
11h00: SA BER manufacturing PMI (May)
11h00: Eurozone unemployment rate (April), CPI (May)
13h00: SA electricity production and consumption (April)
14h15: US ADP employment report (May)
14h30: US initial jobless claims (27 May)
16h00: US ISM manufacturing (May)
SA Naamsa vehicle sales (May)

Read PDF