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Closing the loop 11 August 2022

Closing the loop

Shireen Darmalingam

Market highlights:

  • The rand is stronger at R16.16/$ (R16.18/$*) today; it ranged between R16.11/$ and R16.26/$.
  • The currency is below its 50-day moving average (R16.40/$) and above its 100-day and 200-day moving averages (R15.89/$ and R15.68/$).
  • EM currencies are mixed today; the THB (+1.1%), COP (+0.8%) and IDR (+0.7%) are the biggest gainers; the TRY (-0.5%), BRL (-0.3%) and CNY (-0.2%) are the biggest losers.
  • The US University of Michigan sentiment index for August is scheduled for release tomorrow.
  • The sentiment index is expected to have increased to 52.5 in August from 51.5 in July.
  • Rising inflation continues to weigh on sentiment; the 5-10 yr inflation expectations are expected to remain within the 2.9% - 3.1% range as it has for the past few months.
  • US PPI has fallen in July for the first time since early in the pandemic; PPI fell by 0.5% m/m in July after having increased by 1.0% m/m in June.
  • The m/m decline reflected a drop in energy prices in July.
  • PPI slowed to 9.8% y/y in July from June’s 11.3% y/y increase.
  • The data suggests that some pipeline inflationary pressures are beginning to ease.
  • Locally, mining production declined more than expected in June by 8.0% y/y after having declined by 7.2% y/y in May.
  • On a m/m basis, mining output contracted by 1.4% in June following a 1.2% increase in May.
  • Manufacturing production also contracted in June by 3.5% y/y from a decline of 1.8% y/y in May.
  • Production was down by 1.5% m/m in June after having improved by 0.2% m/m in May.
  • The International Energy Agency (IEA) increased its forecast for global oil demand growth this year on the back of soaring natural gas prices.
  • The IEA expects world oil consumption to increase by 2.1 million barrels per day.
  • OPEC has cut its forecast for the amount of crude it will need to pump in Q3:22 to 1.24 million barrels per day to 28.27 million barrels per day.
  • The oil price is up by 0.9% today, and up by 26.4% in the year-to-date.   
  • The gold price is down by 0.2% today, and down by 1.9% in the year-to-date.
  • Brent crude oil is at $98.31/bbl ($97.40/bbl*).
  • Gold price is at $1794/oz ($1798/oz*). 
  • SA CDS is at 228ps (245bps*), Brazil 241bps (254bps*), Turkey 644bps (686bps*).
  • Yields: US 10yr at 2.78% (2.78%*), German bund at 0.94% (0.89%*) and SA 10-year generic at 10.42% (10.54%*), SA’s R186 is at 8.50% (8.62%*).
  • The JSE ALSI is up by 2.3% today (-0.7%*).

* Denotes yesterday’s close. 

Key events and data:

  • 11h00: Eurozone industrial mining production (June)
  • 16h00: US University of Michigan sentiment, 1 yr and 5-10 yr inflation expectations (August)

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