Closing the loop 10 August 2022

Closing the loop

Shireen Darmalingam

Market highlights:

The rand is stronger at R16.16/$ (R16.60/$*) today; it ranged between R16.15/$ and R16.63/$.
The currency is below its 50-day moving average (R16.38/$) and above its 100-day and 200-day moving averages (R15.88/$ and R15.67/$).
EM currencies are mixed today; the ZAR (+2.7%), HUF (+2.0%) and CZK (+1.8%) are the biggest gainers; the THB (-0.5%), KRW (-0.5%) and TRY (-0.3%) are the biggest losers.

The Bank of Thailand (BoT) hiked its benchmark interest rate by 25 bps to 0.75%; this marked the first interest rate increase in three years.
Today’s move follows months of deliberations on the need to hike rates sooner to avoid having to hike rates in larger increments later.
The BoT signalled that it is likely to stick to a measured pace of hiking rates going forward as it fights rising inflation.
The committee noted that the “policy rate should be normalised to the level that is consistent with sustainable growth in the long term”.
The THB fell as much as 0.5% against the dollar following the rate hike.

US CPI undershot expectations in July coming in at 8.5% y/y from a 9.1% y/y increase in June.
The moderation in CPI was driven by falling gasoline prices; food prices, however, were up in July while the cost of shelter also increased.
Core CPI matched June’s increase of 5.9% y/y.
Fed Chair Jerome Powell has recently indicated that he wants to see compelling evidence that inflation is slowing before the bank stops raising rates.

Locally, the SACCI business confidence index increased to 110.3 in July from 108.5 in June.
The improvement in sentiment, currently at a 4-month high, was supported by the tourism industry in July as well as increased new vehicle sales.
The data suggests that business activity is returning to normal, albeit gradually.
However, the high unemployment rate and a slowdown in economic growth continue to weigh on sentiment.

Both the mining and manufacturing production data for June are scheduled for release tomorrow.
Mining production is expected to have fallen by 5.0% y/y in June from a 7.8% y/y decline in May.
Mining output is expected to have increased by 0.4% m/m in June from May’s 0.7% m/m increase.
Manufacturing production is likely to have contracted by 3.0% y/y in June following a contraction of 2.3% y/y in May.
Output is expected to have fallen on a m/m basis too, by 0.6% in June from a decline of 0.2% in May.

Eskom has indicated that Stage 2 loadshedding could be implemented at short notice today from 4pm to midnight.
Eskom this week proposed that households pay a larger portion of their electricity bills in the form of fixed charges related to electricity supply.
These are currently bundled into the price per unit.

Brent crude oil is at $93.96/bbl ($96.31/bbl*).
Gold price is at $1797/oz ($1795/oz*).
SA CDS is at 266bps (258bps*), Brazil 269bps (265bps*), Turkey 718bps (706bps*).
Yields: US 10yr at 2.74% (2.77%*), German bund at 0.9% (0.92%*) and SA 10-year generic at 10.59% (10.71%**), SA’s R186 is at 8.72% (8.85%**).
The JSE ALSI is down by 0.8% today (+1.1%**).

* Denotes yesterday’s close.

* Denotes Monday’s close.

Key events and data:

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