Closing the loop 23 November 2022

Closing the loop

Shireen Darmalingam

Market highlights:

The rand is stronger at R17.09/$ (R17.26/$*) today; it ranged between R17.08/$ and R17.27/$.
The currency is below its 50-day and 100-day moving averages (R17.86/$ and R17.38/$) and above its 200-day moving average (R16.41/$).
EM currencies are mixed today; the ZAR (+1.0%), RUB (+0.8%) and PHP (+0.7%) are the biggest gainers; the BRL (-0.6%), THB (-0.5%) and CNY (-0.4%) are the biggest losers.

The UK manufacturing PMI remained unchanged in November and remained below the 50-benchmark line at 46.2.
The services PMI also remained steady at 48.8 in November; the composite index increased only slightly to 48.3 in October from 48.2 in October.
The data, however, underestimates the decline in economic activity during the month and the cost-of-living crisis.
UK Chancellor Jeremy Hunt testifies before the Treasury Committee about his Autumn economic statement later today.
The Eurozone composite PMI increased unexpectedly to 47.8 in November, albeit remaining in contraction for the 5th consecutive month, from 47.3 in October.
Both the manufacturing and services PMIs performed better than expected in November.
There were signs of improvement in confidence as supply chain constraints and price pressures eased.

The US composite PMI is expected at 48 in November, from 48.2 in October; the manufacturing gauge likely slipped in November.
The University of Michigan sentiment for November (final estimate) is expected to have fallen, reflecting uncertainty over inflation, rising interest rates, and the likelihood of a recession in 2023.
The US November FOMC meeting minutes are in the spotlight later this evening.

Locally, the October CPI came in higher than expected at 7.6% y/y from 7.5% y/y in September.
CPI was up on a m/m basis in October by 0.4% after having increased by 0.1% in September.
Core CPI increased to 5.0% y/y in October following a 4.7% y/y increase in September.
Today’s upside surprises in both CPI and core CPI, and the interruption of the downtrend in inflation from the recent peak in July, will likely stoke the SARB’s inflation concerns.
The data also supports the general approach in this cycle of erring on the side of caution and frontloading the interest rate hikes.
The SARB is expected to deliver its MPC rate decision tomorrow; the SARB is expected to debate a hike of either 50 bps or 75 bps.

The BER’s business confidence index for Q4:22 slipped to 38 from 39 in Q3:22.
There was improvement in sentiment among building contractors, which helped to partly counteract the deterioration amongst wholesalers and retailers.
The manufacturing sentiment remained at a low level in Q4:22.
Sentiment will, however, face global headwinds, uncertain electricity supply, high inflation and rising interest rates.

The October PPI is scheduled for release tomorrow.
Eskom: Stage 4 loadshedding continues until 5am tomorrow; Stage 2 will be implemented at 5am tomorrow until 4pm.
This cycle is expected until further notice.

The oil price eased today as the EU discussed imposing a price cap on Russian oil between $65 and $70.
The oil price is down by 3.6% today, and up by 9.5% in the year-to-date.
The gold price is down by 0.2% today, and down by 5.1% in the year-to-date.

Brent crude oil is at $85.22/bbl ($88.36/bbl*).
Gold price is at $1736/oz ($1739/oz*).
SA CDS is at 251bps (261bps*), Brazil 263bps (260bps*), Turkey 557bps (569bps*).
Yields: US 10yr at 3.75% (3.75%*), German bund at 1.98% (1.97%*) and SA 10-year generic at 10.81% (10.88%*), SA’s R186 is at 8.65% (8.65%*).
The JSE ALSI is up by 0.8% today (+0.4%*).

* Denotes yesterday’s close.

Key events and data:

Read PDF