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.

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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