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Closing the loop 15 March 2023

Closing the loop

Shireen Darmalingam

Market highlights:

  • The rand is weaker at R18.37/$ (R18.19/$*) today; it ranged between R18.08/$ and R18.43/$.
  • The currency is above its 50-day, 100-day and 200-day moving averages (R17.69/$, R17.54/$ and R17.30/$).
  • EM currencies are mixed today; KRW (+0.5%), PHP (+0.3%) and IDR (+0.1%) are the biggest gainers; the HUF (-3.5%), CZK (-2.6%) and BGN (-1.7%) are the biggest losers.
  • UK Chancellor Jeremy Hunt delivered his first full budget speech to parliament today; Hunt sees the UK economy avoiding a recession in 2023.
  • Hunt noted that UK inflation is expected to fall from 10.7% in Q4:22 to 2.9% by the end of 2023.
  • He nonetheless stated that policymakers will remain vigilant and will not hesitate to take the necessary steps to ensure economic stability.
  • Hunt confirmed that the energy price guarantee, which caps average household bills at £2,500 will be extended at its current level from April to June.
  • This comes as Hunt looks to shield consumers from the cost-of-living crisis.
  • US retail sales registered in line with expectations in February and fell by 0.4% m/m after having increased by 3.2% m/m in January.
  • The decrease in sales comes as consumers feel the weight of elevated inflation.
  • Nine of the 13 retail categories declined in February with the biggest declines emanating from furniture and department stores.
  • The Empire manufacturing index deteriorated for a fourth consecutive month in March to -24.6 from -5.8 in February.
  • The index has been in contraction for 7 of the last 8 months as the manufacturing sector continues to face headwinds.
  • The survey noted declines in the prices paid and received by manufacturers.
  • US PPI inflation slowed to 4.6% y/y in February, down from a revised 5.7% y/y in January; PPI was down 0.1% m/m in February.
  • Eurozone industrial production overshot expectations in January, increasing by 0.7% m/m and partly offsetting December’s decline of 1.3% m/m.
  • Industrial production was driven by intermediate goods (products used in the manufacture of other goods), which increased by 1.5% m/m in January.
  • The data suggests that pressures on the manufacturing sector are starting to ease somewhat as energy prices soften and supply-chain challenges ease.
  • German industrial production rose by 1.8% m/m in January, while the December reading was revised up and reflected a smaller decline than previously reported.
  • French industrial production declined by 1.5% m/m in January; Spanish industrial output was down by 0.9% m/m in January.
  • The ECB is in the spotlight tomorrow as it forges ahead with the fastest tightening cycle in the bank’s history.
  • The bank is expected to hike the benchmark interest rate by 50 bps.
  • The focus will then shift to any signals from the Governing Council on the future course of rate hikes.
  • Locally, retail sales declined by 0.8% y/y in January against expectations for a 2.0% y/y decline and follows a 0.5% y/y contraction in December.
  • Sales were up by 1.5% m/m in January from a decline of 0.5% m/m in December.
  • The BER’s inflation expectations survey is scheduled for release tomorrow.
  • Eskom: Stage 3 loadshedding continues until further notice.
  • The oil price is down by 3.6% today, and down by 13.1% in the year-to-date.
  • The gold price is up by 0.9% today, and up by 5.5% in the year-to-date.
  • Brent crude oil is at $74.67/bbl ($77.45/bbl*).
  • Gold price is at $1924/oz ($1906/oz*). 
  • SA CDS is at 292bps (264bps*), Brazil 247bps (232bps*), Turkey 560bps (528bps*).
  • Yields: US 10yr 3.43% (3.68%*), German bund at 2.14% (2.42%*) and SA 10-year generic at 10.84% (10.79%*), SA’s R186 is at 8.37% (8.41%*).
  • The JSE ALSI is down by 2.5% today (-0.7%*).

* Denotes yesterday’s close. 

Key events and data:

  • 01h50: Japan trade balance (February), core machine orders (February)
  • 03h30: China new home prices (February)
  • 06h30: Japan industrial production, capacity utilisation (January – final)
  • 14h30: US initial jobless claims (11 March), housing starts (February), building permits (February)
  • 15h15: Eurozone ECB MPC decision – 50 bps hike expected
  • SA BER inflation expectations survey

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