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Closing the loop 03 December 2021

Closing the loop

Shireen Darmalingam

Market highlights:

  • The rand is stronger, at R15.91/$ (R15.96/$*) today; it ranged between R15.79/$ and R16.06/$.
  • The currency is above its 50-day, 100-day and 200-day moving averages (R15.24/$, R14.94/$ and R14.65/$ respectively).
  • EM currencies were largely up today; the MXN (+0.9%), BRL (+0.7%) and ZAR (+0.6%) were amongst the biggest gainers.
  • ECB President Christine Lagarde indicated that rate hikes are unlikely to materialise next year.
  • However, Lagarde noted that the ECB would act quickly to stem elevated inflation should it become necessary.
  • Lagarde said that the current surge in inflation is likely to be temporary and that the inflation in the EU should not be compared to the US.
  • Lagarde reiterated that when the conditions for the bank’s forward guidance are satisfied, the ECB will not hesitate to act.
  • Eurozone retail sales increased in October, albeit missed expectations, by 0.2% m/m from a 0.4% m/m contraction in September.
  • Short-term prospects for retail sales, however, are being adversely impacted by rising Covid infections in Europe and the uncertainty around the Omicron variant.
  • US non-farm payrolls undershot expectations in November increasing by 210k (the smallest increase this year) from 546k in October.
  • The slower hiring pace underscores employers’ battle to attract workers as the pandemic lingers and despite higher wages. 
  • The softer increase also comes amid supply-chain constraints and an increase in Covid infections.
  • Softer hiring was noted in the leisure and hospitality industry while manufacturing payrolls increased.
  • The unemployment rate slipped to 4.2% in November from 4.6% in October.
  • The weaker labour market print puts Fed policymakers in a tight spot ahead of the December FOMC meeting.
  • Locally, the economy-wide PMI overshot expectations and increased to 51.7 pts in November from 48.6 pts in October.
  • Activity improved in November following the 3-week strike in the steel industry.
  • Output  and new business orders increased in November pointing to a slight rebound following the strike activity.
  • Businesses continued to enjoy a strengthening in consumer demand in November.
  • However, supply-chain shortages and inflation pressures will continue to weigh on the index in the coming months.
  • The oil price is up by 3.7% today, and up by 39.4% in the year-to-date.
  • The gold price is up by 0.5% today, and down by 6.7% in the year-to-date.
  • Brent crude oil is at $72.24/bbl; ($69.67/bbl*).
  • Gold price is at $1772/oz ($1763/oz*).
  • SA CDS is at 229bps (230bps), lower than Brazil 238bps (241bps*) and Turkey 537bps (534bps*).
  • Yields: US 10yr at 1.42% (1.44%*), German bund at -0.377% (-0.369%*) and SA 10-year generic at 10.02% (10.06%*), SA’s R186 is at 7.94% (7.97%*).
  • The JSE ALSI is up by 0.1% today (-0.3%*).

* Denotes yesterday’s close. 

Key events and data:

  • On Monday: 11h30: Eurozone Sentix investor confidence (December)

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