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In the loop 08 February 2024

In the loop

Shireen Darmalingam

What you should know this morning:

  • The rand is weaker this morning, at R18.91/$, after closing weaker yesterday (R18.90/$*).
  • EM currencies were mixed yesterday; the IDR (+0.6%), PEN (+0.5%) and PHP (+0.4%) were the biggest gainers; the RUB (-0.7%), CLP (-0.5%) and HUF (-0.4%) were the biggest losers.
  • Asian equity markets are mixed this morning; the Nikkei and Shanghai Composite are up, while the Hang Seng is down.
  • The Reserve Bank of India (RBI) has kept its benchmark interest rate unchanged, at 6.5%.
  • The central bank noted that its multi-pronged policy has worked well to maintain, and strengthen, financial stability.
  • China’s CPI in January fell at its fastest pace since the 2008/9 global financial crisis, by 0.8% y/y, after having fallen by 0.3% y/y in December.
  • Lower food and energy prices, as well as a prolonged property downturn, have contributed to declining prices in China.
  • PPI declined further, by 2.5% y/y in January, from a 2.7% y/y fall in December.
  • Several ECB policymakers are due to comment on economic growth and monetary policy later today.
  • Investors will also keep an eye on the release of the ECB’s Economic Bulletin later today.
  • Boston Fed President Susan Collins noted yesterday that she would like to see more evidence that inflation is still trending lower before considering interest rate cuts.
  • Collins noted though that this is likely to happen “later this year”.
  • Collins indicated that “broadening signs of progress should provide the necessary confidence” for the Fed to “begin a methodical adjustment to its monetary policy stance”.
  • Fed Governor Adriana Kugler also communicated that inflation is moderating.
  • Kugler also sees little urgency to reduce the Fed funds rate soon.
  • She warned that “if progress on disinflation stalls, it may be appropriate to hold the target range steady at its current level for longer to ensure continued progress on our dual mandate”.
  • Richmond Fed President Thomas Barkin concurred that it would be a good idea for the Fed to take its time before cutting rates given the uncertainty about where the US economy is headed.
  • Locally, the market awaits President Cyril Ramaphosa’s State of the Nation Address (SONA) later today.
  • The president will likely dedicate much of the SONA to detailing the gains he believes have been made by government over the past year.
  • A broader historical oration of the ANC’s achievements during the democratic era is also expected.
  • The president is also likely to announce the election date at this SONA.
  • Our longstanding assumption, which seems to have been validated by recent developments, is that the elections will be held in the second half of May.
  • Manufacturing production for December, also due out today, is expected at 2.7% y/y, following a 1.9% y/y increase in November.
  • On a m/m basis, production too is likely to have increased, by 0.4% in December, from a 0.8% increase in November.
  • Eskom: Stage 2 loadshedding is currently in place until further notice.
  • Brent crude is up this morning, and up by 3.1% year-to-date.
  • The gold price is down this morning, and down by 1.5% year-to-date.
  • Brent crude oil is currently at $79.46/bbl; ($79.21/bbl*).
  • Gold is at $2032/oz ($2035/oz*).
  • SA CDS 228bps*, Brazil 134bps* and Turkey 322bps*.
  • Yields: US 10yr at 4.12%*, German bund at 2.31%* and SA 10-year generic at 11.20%*, SA’s R2030 at 9.86%*.

* Denotes yesterday’s close.

Key events and data:

  • 11h00: Eurozone ECB publishes Economic Bulletin
  • 13h00: SA manufacturing production (December)
  • 15h30: US initial jobless claims (3 February)
  • 19h00: SA President’s State of the Nation Address (SONA)

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