Closing the loop 06 December 2022

Closing the loop

Shireen Darmalingam

Market highlights:

The rand is stronger at R17.28/$ (R17.49/$*) today; it ranged between R17.25/$ and R17.49/$.
The currency is below its 50-day and 100-day moving averages (R17.76/$ and R17.40/$) and above its 200-day moving average (R16.50/$).
EM currencies are mixed today; the CLP (+1.5%), ZAR (+1.2%) and BRL (+0.5%) are the biggest gainers; the KRW (-2.0%), INR (-1.0%) and IDR (-1.0%) are the biggest losers.

The ECB’s Chief Economist Philip Lane commented that inflation in the Eurozone is likely near its peak.
Lane noted that borrowing costs are likely to increase further, but that the bank may slow the pace of rate hikes (after recent hikes of 75 bps).
The ECB has hiked rates by 200 basis points this year; he acknowledged that the bank should consider the scale of rate increases when it meets later this month.
Lane said that he cannot “rule out some extra inflation early in 2023’.
Inflation is expected to ease in H2:23.

Chile’s central bank is expected to hold its benchmark interest rate steady at 11.25% today following 11 consecutive rate increases as inflation starts to ease.
Peru is expected to hike interest rates for the 17th consecutive time as inflation increases above the bank’s target.

Locally, GDP overshot expectations in Q3:22 coming in at 1.6% q/q (sa) after having contracted by 0.7% q/q (sa) in Q2:22.
The improvement comes on the back of a sharp increase in activity in the agricultural sector.
Eight sectors reported positive growth in Q3:22 with the agricultural and finance sector contributing the most to the Q3:22 GDP expansion.
The transport, manufacturing, trade, construction and mining sectors also contributed positively to the Q3:22 improvement.
The electricity and personal services sectors subtracted from growth in the 3rd quarter.
Household consumption contracted by 0.3% q/q in Q3:22 and could come under further pressure as consumers feel the pinch of high inflation and interest rates.
On a y/y basis, GDP was up by 4.1% in Q3:22 from a 0.2% increase in Q2:22.

The SARB’s gross and net reserves for November are due out tomorrow.
Gross reserves are expected to have increased to $59.16bn in November from $58.70bn in October; net reserves are expected to have increased to $52.90bn in November from $52.19bn in October.
Eskom: Stage 3 loadshedding continues until 5am; Stage 2 will kick in then.

President Cyril Ramaphosa has filed papers to the Constitutional Court today to review Parliament’s Section 89 of the Phala Phala panel report.
The president is looking to nullify the findings of the report and argues that the panel misjudged the information and that the panel went beyond its mandate.
Investors will be watching for new developments during this period of political uncertainty.

Brent crude oil is at $82.05/bbl ($82.68/bbl*).
Gold price is at $1778/oz ($1769/oz*).
SA CDS is at 269bps (258bps*), Brazil 245bps (236bps*), Turkey 528bps (512bps*).
Yields: US 10yr at 3.55% (3.57%*), German bund at 1.80% (1.88%*) and SA 10-year generic at 11.15% (11.14%*), SA’s R186 is at 9.00% (9.00%*).
The JSE ALSI is down by 0.3% today (+0.5%*).

* Denotes Yesterday’s close.

Key events and data:

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