In the loop 03 October 2024

In the loop

Shireen Darmalingam

What you should know this morning:

The rand is weaker this morning, at R17.39/$, after closing stronger yesterday (R17.34/$*).
EM currencies were mixed yesterday; the MXN (+1.9%), COP (+0.9%) and RUB (+0.9%) were the biggest gainers; the CLP (-0.7%), KRW (-0.6%) and HUF (-0.6%) were the biggest losers.
Asian equity markets: the Nikkei is up, while the Hang Seng is down.

ECB Governing Council member Isabel Schnabel noted yesterday that the ECB must address the Eurozone’s disappointing economic performance.
Schnabel noted that the central bank “cannot ignore the headwinds to growth”.
“With signs of softening demand and further progress in disinflation, a sustainable fall of inflation back to our 2% target in a timely manner is becoming more likely”.
This is despite still high services inflation and strong wage growth.
Expectations are for the ECB to cut interest rates further when meeting on 17 October.

The UK Decision Maker Panel (DMP) 3m and 1yr inflation expectations for September will be in focus today.
The 3m ahead inflation expectations are expected at 3.4% in September, from 3.6% in August.
One-year ahead inflation expectations are expected to have increased to 2.7% in September, from 2.6% in August.
BOE Governor Andrew Bailey commented today that he sees more aggressive interest rate cuts in the coming months provided that inflation continues to moderate.

Turkish CPI for September is due out today and is expected to come in at 48.3% y/y, from 52% y/y in August.
On a m/m basis, CPI is expected to have increased by 2.2% in September, after having increased by 2.5% in August.
Core CPI is expected to have moderated in September, to 48% y/y, from 51.6% y/y in August.
Such a moderation would add pressure on the central bank to begin easing interest rates at the October monetary policy meeting.

Richmond Fed President Thomas Barkin commented yesterday that, while significant progress has been made with regard to bringing inflation down, it is too early for the central bank to declare victory.
Barkin added that “there is still work to do on inflation”.
He cited risks to both sides of the inflation mandate.
The economy could continue to enjoy positive supply-side influences, such as increased labour force participation and productivity; this could help to ease price pressures.
However, he added that “recent union actions or a pullback in labour supply” could drive wages higher.

Locally, the industry-wide PMI for September is due out today; the index is currently just above the 50pt benchmark, at 50.5.
Electricity production and consumption for August are scheduled for release today.

Brent crude oil is currently at $74.83/bbl; ($73.90/bbl*).
Gold is at $2652/oz ($2649/oz*).
SA CDS 180bps*, Brazil 146bps* and Turkey 275bps*.
Yields: US 10yr at 3.78%*, German bund at 2.09%*, SA 10-year generic at 10.23%*, SA’s R2035 at 10.31%*.

* Denotes yesterday’s close.

Key events and data:

09h00: Turkey CPI (September)
09h15: SA S&P Global industry-wide PMI (September)
10h00: Eurozone HCOB services and composite PMI (September – final)
10h30: UK BOE Decision Maker Panel (DMP) 3m and 1yr inflation expectations (September)
10h30: UK S&P Global services and composite PMI (September – final)
11h00: Eurozone PPI (August)
13h00: SA electricity production and consumption (August)
14h30: US initial jobless claims (28 September)
15h45: US S&P Global services and composite PMI (September – final)
16h00: US factory orders (august), durable goods orders (August – final), ISM services index (September)

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