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Closing the loop 20 January 2023

Closing the loop

Shireen Darmalingam

Market highlights:

  • The rand is stronger at R17.18/$ (R17.32/$*) today; it ranged between R17.13/$ and R17.35/$.
  • The currency is below its 100-day moving average (R17.52/$) and above its 50-day and 200-day moving averages (R17.17/$ and R16.88/$).
  • EM currencies are mixed today; the RUB (+1.5%), ZAR (+0.8%) and MXN (+0.7%) are the biggest gainers; the BRL (-0.9%), HUF (-0.3%) and KRW (-0.3%) are the biggest losers.
  • The WEF annual meetings in Davos ended with a call for a more collaborative world.
  • After five days of discussions on climate, war and economic issues, WEF President Borge Brende closed the gathering saying that significant progress has been made on climate action and equitable growth targets.
  • Brende noted that the world may be fragmented today but hopes have emerged that it may not be so tomorrow.
  • IMF Managing Director Kristalina Georgieva commented that her message to world leaders is to be pragmatic and collaborate.
  • Georgieva noted that fragmentation can cost the global economy up to 7%.
  • ECB President Christine Lagarde commented today that her mantra is for the central bank to “stay the course”.
  • She noted that policymakers must not ease up in their battle to fight inflation, despite the spike in prices now appearing to have peaked.
  • Lagarde and several other policymakers have been against the idea that interest rate hikes should be slowed after a 50 bps hike next month.  
  • She also noted that the Eurozone economy is, however, proving to be robust, despite rising rates.
  • UK retail sales, including fuel, fell sharply in December by 1.0% m/m against expectations of a rise and following a 0.5% m/m decline in November.
  • It was expected that consumers would take advantage of the first unrestricted Christmas since 2019, bolstered by fiscal support.
  • However, consumers cut back on buying a number of items, as high inflation meant paying more to buy less.
  • The unexpected drop in retail sales highlights downside risk to the economy and that the cost-of-living squeeze continues to impact spending.
  • Locally, it was a quiet day as far as data releases were concerned.
  • We look to the SARB MPC meeting next week; a 25 bps hike in the repo rate is expected.
  • Eskom: Stage 4 loadshedding continues from 4pm until 5am today and tomorrow evening; Stage 3 loadshedding will kick in from 5am to 4pm on Saturday.
  • Loadshedding will be reduced to Stage 2 on Sunday morning.
  • The oil price is up by 0.4% today, and up by 0.7% in the year-to-date.   
  • The gold price is up by 0.3% today, and up by 5.7% in the year-to-date.
  • Brent crude oil is at $86.50/bbl ($86.16/bbl*).
  • Gold price is at $1925/oz ($1920/oz*). 
  • SA CDS is at 261bps (262bps*), Brazil 247bps (246bps*), Turkey 561bps (564bps*).
  • Yields: US 10yr 3.44% (3.39%*), German bund at 2.13% (2.06%*) and SA 10-year generic at 10.48% (10.46%*), SA’s R186 is at 8.24% (8.20%*).
  • The JSE ALSI is down by 0.6% today (-0.5%*).

* Denotes yesterday’s close. 

Key events and data:

  • On Monday: 17h00: Eurozone consumer confidence (January)
  • 17h00: US leading index (December)

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