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 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:

Read PDF