Closing the loop 29 November 2021

Closing the loop

Shireen Darmalingam

Market highlights:

The rand is stronger, at R16.14/$ (R16.28/$*) today; it ranged between R16.07/$ and R16.24/$.
The currency is above its 50-day, 100-day and 200-day moving averages (R15.15/$, R14.89/$ and R14.62/$ respectively).
EM currencies were mixed today; the RUB (+1.8%), ZAR (+1.0%) and MXN (+0.8%) were amongst the biggest gainers; the TRY (-3.1%), RON (-0.4%) and BGN (-0.4%) were amongst the biggest losers.

Global equity markets and the oil price recovered somewhat from the slump of last week.
Markets have been digesting information of the impact of the Omicron variant, which has been detected in at least 17 countries.
Equity and financial markets are likely to remain volatile this week as scientists try to assess the damage that the variant could cause.
The WHO said understanding its severity "will take days to several weeks”.
The WHO noted today that the global risk from the Omicron variant is “very high”.

The Eurozone consumer confidence fell to -6.8 pts in November from -4.8 pts in October.
Economic confidence also slipped to 117.5 pts in November from 118.6 pts in October.
Confidence declined amid rising inflation, supply chain constraints and an increase in Covid infections on the bloc.

The US Conference Board confidence is due out tomorrow and is expected to have slipped to 110.7 pts in November from 113.8 pts in October.
Short-term inflation concerns and the resurgence of Covid cases could weigh on confidence.
However, the labour market is improving while the stock market reached new highs.
A slippage in confidence could point to downside risks to growth as Covid lingers.

Locally, private sector credit extension for October is expected to have increased by 1.6% y/y from September’s increase of 2.0% y/y.
We expect PSCE growth to be largely driven by the momentum in household credit, with corporate credit remaining relatively steady.
The recent momentum, however, in household credit has been disappointing.
The trade balance is expected to come in at around R20bn In October from R22bn in September.
The partial reversal of the sharp increase in oil imports for September will likely have influenced the trade balance in October.
Logistical constraints have also weighed on export volumes.
Stats SA releases the Q3:21 labour data tomorrow; the unemployment rate, currently at 34.4% in Q2:21, will be closely watched.

SA CDS is at 246bps (248bps), lower than Brazil 263bps (266bps*) and Turkey 509bps (499bps*).
Yields: US 10yr at 1.54% (1.47%*), German bund at -0.307% (-0.335%*) and SA 10-year generic at 10.25% (10.32%*), SA’s R186 is at 8.11% (8.17%*).
The JSE ALSI is up by 2.3% today (+2.8%*).

* Denotes Friday’s close.

Key events and data:

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