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Closing the loop 24 January 2023

Closing the loop

Shireen Darmalingam

Market highlights:

  • The rand is weaker at R17.29/$ (R17.20/$*) today; it ranged between R17.15/$ and R17.31/$.
  • The currency is below its 100-day moving average (R17.52/$) and above its 50-day and 200-day moving averages (R17.17/$ and R16.91/$).
  • EM currencies are mixed today; the IDR (+1.3%), CLP (+0.9%) and HUF (+0.6%) are the biggest gainers; the ZAR (-0.5%), INR (-0.4%) and COP (-0.4%) are the biggest losers.
  • The Eurozone S&P Global composite PMI increased to 50.2 in January from 49.3 in December.
  • The increase was the third consecutive rise following the low reached in October.
  • The improvement comes on the back of easing energy concerns, which have been supported by government assistance.
  • Supply chain challenges have also eased.
  • The increase into expansionary territory is likely to support the case for the ECB to continue hiking rates to tame inflation.
  • The manufacturing PMI increased to 48.8 in January from 47.8 in December.
  • The UK composite PMI slipped to 47.8 in January from 49 in December; the slippage was driven by a deterioration in the services PMI.
  • The Royal Bank of Canada (RBC) meets tomorrow to decide on rates and is largely expected to hike its benchmark rate by 25 bps to 4.5% instead of pausing (previously expected).
  • The change in sentiment comes following a strong jobs report with the unemployment rate slipping close to a record low of 5% in December.
  • The RBC also sees signs of inflationary pressure becoming less broad based.
  • Core CPI has also moderated on a m/m basis.
  • Locally, the SARB’s leading indicator for November increased only marginally to 123.1 from 123 in October.
  • The largest detractors were a narrowing of the interest rate spread and a decrease in SA’s export commodity price index denominated in USD.
  • The largest positive contributors were an acceleration on the 6-months smoothed growth rate in the number of new passenger vehicles sold and in increase in the volume of orders in manufacturing.
  • The coincident indicator, which measures current economic conditions, slipped to 97.5 in October from 98.2 in September.
  • The lagging indicator increased to 98.4 in October from 96.8 in September.
  • Eskom: Stage 4 loadshedding continues from 4pm until 5am today and tomorrow evening; Stage 3 loadshedding will be implemented from 5am to 4pm until further notice.
  • The oil price is down by 0.1% today, and up by 2.5% in the year-to-date.   
  • The gold price is up by 0.4% today, and up by 5.8% in the year-to-date.
  • Brent crude oil is at $88.08/bbl ($88.19/bbl*).
  • Gold price is at $1930/oz ($1923/oz*). 
  • SA CDS is at 259bps (254bps*), Brazil 247bps (244bps*), Turkey 556bps (551bps*).
  • Yields: US 10yr 3.51% (3.50%*), German bund at 2.21% (2.20%*) and SA 10-year generic at 10.48% (10.51%*), SA’s R186 is at 8.22% (8.25%*).
  • The JSE ALSI is down by 0.1% today (+1.1%*).

* Denotes yesterday’s close. 

Key events and data:

  • 07h00: Japan leading and coincident indices (November – final)
  • 09h00: UK PPI (December)
  • 14h00: US MBA mortgage applications (20 January)
  • 17h00: Royal Bank of Canada interest rate decision – 25 bps hike expected

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