Closing the loop
Shireen Darmalingam
Market highlights:
- The rand is stronger at R19.66/$ (R19.77/$*) today; it ranged between R19.65/$ and R19.92/$.
- The currency is above its 50-day, 100-day and 200-day moving averages (R18.6157/$, R18.24/$ and R17.88/$).
- EM currencies are mixed today; the CZK (+1.0%), COP (+0.9%) and RON (+0.8%) were the biggest gainers; the TRY (-0.4%), ARS (-0.2%) and PHP (-0.2%) were the biggest losers.
- The rand weakened to a new intraday record high of R19.92/$; the rand has, however, gained ground since then.
- Loadshedding and questions around SA’s relationship with Russia continue to impact the currency and investor outflows while keeping inflows limited.
- Electricity production, according to Stats SA, declined by 8.6% y/y in April after having declined by 5.6% y/y in March.
- Consumption was also down by 8.1% y/y in April following a decline of 4.5% y/y in March.
- Eskom: Stage 6 loadshedding is currently in place until 5am tomorrow when Stage 4 loadshedding will resume.
- The BER manufacturing PMI registered in line with expectations and remained below the 50-benchmark line; the PMI slipped to 49.2 in May from 49.8 in April.
- The expected business conditions in 6 months’ time declined to a 3-year low 43.7 in May from 51 in April.
- This fall comes on the back of Eskom confirming concerns about the possibility of higher stages of loadshedding during winter.
- This is the most pessimistic respondents have been since the harsh lockdown stages of the pandemic.
- The business activity index was largely unchanged in May while the new sales orders index improved in May, albeit remained in contractionary territory.
- The purchasing price index increased in May as the weaker rand exchange rate likely added to upward pressure on costs despite the drop in fuel prices in May.
- The employment sub-index remained relatively steady in May coming in at 45.6 from 45.4 in April.
- Naamsa vehicle sales overshot expectations and increased by 10.1% (against expectations for a decline), after having decreased by 0.2% y/y in April.
- 43,060 vehicles were sold in May; 39,101 were sold in May 2022 and 37,238 in April 2023.
- 27,401 passenger cars were sold in May from 27,386 sold in May 2022; 12,825 light commercial vehicles were sold, up from 9,261 in May 2022.
- Vehicle exports were up by 67.5% y/y, to 31,833 units in May, compared with 19,007 units in May 2022.
- Naamsa noted the industry continues to face multiple headwinds which include elevated interest rates, a depreciating currency, sectoral supply chain disruptions as well as producer and consumer inflationary pressures.
- The US ADP private-sector payrolls overshot expectations in May coming in at 278k following a downwardly revised increase to 291k in April.
- The increase was led by job gains in leisure and hospitality, mining, construction and trade and transportation.
- Today’s data highlights the resilience of the labour market despite concerns that the economy is cooling.
- The non-farm payrolls (NFP) report for May, due out tomorrow, is expected to show a slowdown in the pace of hiring.
- Eurozone CPI moderated more than expected in May, coming in at 6.1% y/y from 7.0% y/y in April.
- Core CPI also moderated in May to 5.3% y/y from 5.6% y/y in April.
- While core inflation eased, it is unlikely to keep the ECB from hiking rates at its upcoming MPC meeting.
- ECB policymakers have expressed concern over the path of underlying consumer prices which has been their key focus in determining how high to hike interest rates.
- ECB president Christine Lagarde has recently pledged to raise interest rates further; Lagarde noted that the central bank still has “ground to cover” in rates.
- Eurozone unemployment rate slipped to 6.5% in April from an upwardly revised 6.6% in March.
- The oil price is down 0.1% today, and down by 15.4% in the year-to-date.
- The gold price is up by 0.5% today, and up by 8.2% in the year-to-date.
- Brent crude oil is at $72.62/bbl ($72.66/bbl*).
- Gold price is at $1974/oz ($1965/oz*).
- SA CDS is at 316bps (319bps*), Brazil 211bps (212bps*), Turkey 570bps (605bps*).
- Yields: US 10yr 3.60% (3.65%*), German bund at 2.25% (2.28%*) and SA 10-year generic at 12.10% (12.12%*), SA’s R2030 is at 11.28% (11.29%*).
- The JSE ALSI is up by 0.5% today (-1.2%*).
* Denotes yesterday’s close.
Key events and data:
- 14h30: US non-farm payrolls (May), unemployment rate (May)
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