Closing the loop
02 June 2023
Closing the loop
Shireen Darmalingam
Market highlights:
- The rand is stronger at R19.49/$ (R19.61/$*) today; it ranged between R19.40/$ and R19.65/$.
- The currency is above its 50-day, 100-day and 200-day moving averages (R18.63/$, R18.26/$ and R17.89/$).
- EM currencies are mixed today; the KRW (+1.2%), BRL (+1.1%) and COP (+1.0%) were the biggest gainers; the TRY (-0.3%), RUB (-0.2%) and ARS (-0.2%) were the biggest losers.
- The rand gained today for a second consecutive day on growing expectations that the US Fed could pause its rate hiking cycle this month.
- Fed policymakers have over the past two days reinforced expectations that the Fed could skip a rate hike at its June FOMC meeting.
- It was a quiet day as far as data releases were concerned.
- President Cyril Ramaphosa commented yesterday that while the electricity crisis appears unrelenting, government is making progress in resolving the electricity challenge.
- Government has acknowledged that SA faces difficult months ahead.
- Government is, however, more confident that the measures in place, including new investment in electricity generation capacity, “will enable us to end loadshedding and achieve energy security”.
- President Ramaphosa noted that the Presidency is driving collaboration between different government departments, SOEs and public entities through programmes such as Operation Vulindlela.
- Eskom: Stage 4 loadshedding is currently in place and will continue until 5am tomorrow.
- Various stages of loadshedding will be implemented over the weekend.
- US non-farm payrolls overshot expectations in May increasing by 339k from an upwardly revised 294k in April.
- The increase in payrolls was broad-based, with gains reported in professional and business services, government and healthcare.
- Private payrolls increased by 283k in May from an upwardly revised 253k in April.
- The unemployment rate, nonetheless, increased to 3.7% in May from 3.4% in April.
- While the labour force participation rate held steady at 62.6%, the size of the labour force expanded in May.
- The stronger-than-expected payrolls number will likely reignite the policy debate around whether the Fed should continue hiking rates or pause at the next policy meeting.
- A UN food commodity prices index fell by 2.6% on the back of a decline in the prices of grains, vegetable oil and dairy which offset higher sugar and meat prices.
- Global food prices are now at the lowest level in two years in May and could revive hopes that prices on supermarket shelves could ease.
- The oil price is up by 2.0% today, and down by 11.8% in the year-to-date.
- The gold price is down by 0.6% today, and up by 7.8% in the year-to-date.
- Brent crude oil is at $75.75/bbl ($74.28/bbl*).
- Gold price is at $1966/oz ($1978/oz*).
- SA CDS is at 296bps (318bps*), Brazil 205bps (211bps*), Turkey 563bps (580bps*).
- Yields: US 10yr 3.65% (3.59%*), German bund at 2.30% (2.24%*) and SA 10-year generic at 12.00% (12.06%*), SA’s R2030 is at 11.19% (11.24%*).
- The JSE ALSI is up by 1.8% today (+1.0%*).
* Denotes yesterday’s close.
Key events and data:
- On Monday: 02h30: Japan Jibun Bank services and composite PMI (May – final)
- 03h45: China Caixin services and composite PMI (May)
- 09h15: SA industry-wide PMI (May)
- 10:00: Eurozone HCOB services and composite PMI (May – final)
- 10h30: Eurozone Sentix investor confidence (June)
- 10h30: UK S&P Global/CIPS services and composite PMI (May – final)
- 11h00: Eurozone PPI (April)
- 15h45: US S&P Global services and composite PMI (May – final)
- 16h00: US factory orders (April), durable goods orders (April – final), ISM services (May)
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