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In the loop 14 March 2023

In the loop

Shireen Darmalingam

What you should know this morning:

  • The rand is weaker this morning, at R18.25/$, after closing stronger yesterday (R18.19/$*).
  • The rand gained yesterday following the collapse of Silicon Valley Bank (SVB) and expectations that the Fed would not hike rates by 50 bps next week.
  • EM currencies were mixed yesterday; the KRW (+1.8%), RUB (+1.6%) and THB (+1.3%) were the biggest gainers; the MXN (-2.1%), HUF (-1.6%) and COP (-1.2%) were the biggest losers.
  • Asian equity markets the Nikkei, Hang Seng and Shanghai Composite are down.
  • The Bank of Japan (BOJ) has stepped into the Tokyo equity market for the first time since early December 2022, buying $5.2bn worth of exchange-traded funds.
  • This as the banks sell-off spreads to Japan, with the SVB collapse shaking up global markets.
  • Following the collapse of both SVB and Signature Bank, US President Joe Biden has noted the US banking system as "safe", and vowed stricter banking regulations.
  • US regulators have been forced to intervene with a series of emergency measures to prevent a broader crisis.
  • This includes guaranteeing deposits in both banks, setting up a new facility to give banks access to emergency funds, and making it easier for banks to borrow from the Fed in emergencies.
  • The collapse of these two banks has led to large US banks now being inundated with new depositors trying to transfer funds from smaller lenders.
  • Fed Chair Jerome Powell has demanded a "thorough, transparent, and swift review” of the collapse of SVB.
  • The US CPI for February is due out today; it likely moderated to 6.0% y/y in February, from 6.4% y/y in January.
  • On a m/m basis, CPI is expected to have increased by 0.4% in February, after having increased by 0.5% in January.
  • Core CPI is also likely to have moderated in February, to 5.5% y/y, from 5.6% in January.
  • The SVB turmoil could lead to the Fed deciding to slow rate hikes at the upcoming FOMC meeting.
  • However, still elevated headline and core CPI outcomes will likely support the case for a continuation of the rate hiking cycle at the FOMC meetings in May, June and July.
  • The UK ILO unemployment rate for the 3 months to January likely increased to 3.8%, from 3.7% in the 3 months to December.
  • Vacancies are expected to have continued declining, albeit remaining high.
  • Wage gains are expected to have moderated to 6.6% in the 3 months to January, from 6.7% in the 3 months to December.
  • Locally, mining production for January is expected to have declined by 4.6% y/y after having declined by 3.5% y/y in December.
  • Manufacturing production for January is expected to have fallen by 5.4% y/y following a 4.7% y/y decline in December.
  • Eskom: Stage 4 loadshedding continues until further notice.
  • Brent crude oil is down this morning, and down by 7.0% year-to-date.
  • The gold price is down this morning, and up by 4.3% year-to-date.
  • Brent crude oil is currently at $79.87/bbl; ($80.77/bbl*).
  • Gold is at $1902/oz ($1909/oz*).
  • SA CDS 273bps*, Brazil 237bps* and Turkey 534bps*.
  • Yields: US 10yr at 3.57%*, German bund at 2.59%* and SA 10-year generic at 10.78%*, SA’s R186 at 8.40%*.

* Denotes yesterday’s close. 

 Key events and data: 

  • 09h00: UK ILO unemployment rate (January)
  • 11h30: SA mining production (January)
  • 12h00: US NFIB Small Business Optimism (February)
  • 13h00: SA manufacturing production (January)
  • 14h30: US CPI (February)

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