Closing the loop 05 June 2023

Closing the loop

Shireen Darmalingam

Market highlights:

The rand is stronger at R19.23/$ (R19.52/$*) today; it ranged between R19.22/$ and R19.56/$.
The currency is above its 50-day, 100-day and 200-day moving averages (R18.65/$, R18.28/$ and R17.90/$).
EM currencies are mixed today; the ZAR (+1.5%), IDR (+0.7%) and COP (+0.6%) were the biggest gainers; the TRY (-1.5%), ARS (-0.7%) and PHP (-0.6%) were the biggest losers.

The rand strengthened for a third consecutive day and in contrast to several EM currencies that have lost ground against the dollar.
Eskom reduced the number of hours of rolling blackouts and suspended loadshedding until 4pm today.
Stage 4 loadshedding is currently in place and will continue until 5am tomorrow.
Stage 1 loadshedding will be implemented at 5am until 4pm tomorrow.
Eskom has indicated that the schedule is subject to rapid change at short notice.

The industry-wide PMI fell more than expected in May to 47.9, its lowest in two-years, from 49.6 in April.
The third consecutive month of contraction reflects the capacity constraints due to loadshedding which has weighed on businesses.
Businesses highlighted that severe inflation, driven by weakness in the rand, high electricity costs and elevated wage pressures continues to weigh on the outlook.
Despite loadshedding and concerns around a bleak winter, firms remained positive about the future and flagged an improvement in supply chain challenges.

GDP growth for Q1:23, due out tomorrow, is expected at 0.4% q/q (sa), from -1.3% q/q (sa) in Q4.22, according to Bloomberg consensus.
On a y/y basis, GDP growth is expected at 0.1% in Q1:23, from 0.9% y/y in Q4:22.

Turkish CPI came in at 39.6% y/y in May, its lowest level since late 2021, from 43.7% y/y in April.
The moderation came after President Recep Tayyip Erdo?an gave away free gas ahead of the elections, which helped push down household bills.
The TRY extended losses and weakened by 1.5% following the release of the data.

ECB President Christine Lagarde commented today that price pressures in the region remain strong.
Lagarde noted that underlying inflationary pressures remain high and that there is currently no evidence that underlying inflation has peaked.
She also said that the ECB’s “future decisions will ensure that the policy rates will be brought to levels sufficiently restrictive to achieve a timely return of inflation to our 2% medium-term target and will be kept at those levels for as long as necessary”.

Both the Eurozone services and composite indices (final estimates) fell from their previous estimates and from the April prints.
The UK services PMI (final estimate) increased to 55.2 in May from its previous estimate of 55.1 but slipped from 55.9 in April.
The final estimate of the composite PMI increased to 54 in May (from a previous estimate of 53.9) but fell from 54.9 in April.

Brent crude oil is at $76.58/bbl ($76.13/bbl*).
Gold price is at $1957/oz ($1947/oz*).
SA CDS is at 290bps (295bps*), Brazil 203bps (205bps*), Turkey 501bps (555bps*).
Yields: US 10yr 3.72% (3.69%*), German bund at 2.37% (2.31%*) and SA 10-year generic at 11.94% (12.03%*), SA’s R2030 is at 11.13% (11.23%*).
The JSE ALSI is down by 0.9% today (+1.8%*).

* Denotes Friday’s close.

Key events and data:

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