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In the loop 19 September 2024

In the loop

Shireen Darmalingam

What you should know this morning:

  • The rand is stronger this morning, at R17.51/$, after closing stronger yesterday (R17.55/$*).
  • EM currencies were mixed yesterday; the COP (+0.7%), ZAR (+0.5%) and BRL (+0.4%) were the biggest gainers; the RUB (-1.0%), MXN (-0.3%) and TWD (-0.2%) were the biggest losers.
  • Asian equity markets the Nikkei, Hang Seng and Shanghai Composite are up.
 
  • Central bank watch: the US FOMC yesterday voted 11 to 1 to lower the Fed funds rate by 50 bps, to a range of 4.75% to 5%.
  • The committee noted having “gained greater confidence that inflation is moving sustainably toward 2%, and judges that the risks to achieving its employment and inflation goals are roughly in balance”.
  • The Fed added that it is “committed to supporting maximum employment” in addition to bringing inflation back to its target.
  • The substantial cut highlights concerns among policymakers about the US labour market.
  • Projections showed that a narrow majority, 10 of 19 policymakers, supported cutting rates by at least a further 50 bps over the two remaining FOMC meetings this year.
  • The Brazilian central bank yesterday hiked the Selic rate by 25 bps, to 10.75%.
  • The central bank said that further hikes would be likely on the back of resilient growth and inflation expectations.
  • In the UK, the BOE will announce its policy decision today; the BOE is expected to keep its benchmark rate unchanged. 
  • The focus will likely be on the bank’s quantitative tightening strategy.
 
  • US existing homes sales, due out today, will likely have declined in August.
  • Existing home sales are expected to have decreased by 1.3% m/m (to 3.90m) in August, after having increased by 1.3% m/m (to 3.95m) in July.
 
  • Locally, the SARB’s MPC meeting will be in the spotlight today.
  • We expect the SARB to cut the repo rate by 25 bps, to 8.00%.
  • The debate among investors has shifted in recent weeks from the timing of the SARB’s interest rate-cutting cycle to the speed and magnitude thereof.
  • Our longstanding view still stands that the bank will cut interest rates from this (September) MPC meeting by 100 bps cumulatively (in 25 bps increments).
  • There is a possibility that this may be slightly quicker, with a larger 50 bps rate cut at some stage.
 
  • Brent crude is up this morning, and down by 4.3% year-to-date.
  • The gold price is down this morning, and up by 24.4% year-to-date.
 
  • Brent crude oil is currently at $73.77/bbl; ($73.65/bbl*).
  • Gold is at $2566/oz ($2574/oz*).
  • SA CDS 179bps*, Brazil 146bps* and Turkey 258bps*.
  • Yields: US 10yr at 3.70%*, German bund at 2.19%*, SA 10-year generic at 10.05%*, SA’s R2030 at 8.83%*.
 

* Denotes yesterday’s close.

Key events and data:

  • 10h00: Eurozone current account (July)
  • 13h00: UK BOE interest rate decision – no change expected (19 September)
  • 14h30: US current account balance (Q2:24), initial jobless claims (14 September)
  • 15h00: SA SARB interest rate decision – 25 bps cut expected
  • 14h00: US leading index (August), existing home sales (August)
 

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