In the loop

What you should know this morning:

• The rand is weaker this morning, at R19.25/$, after closing stronger yesterday (R19.24/$*).
• EM currencies were mixed yesterday; the ZAR (+1.1%), PLN (+0.9%) and KRW (+0.6%) were the biggest gainers; the ARS (-0.7%), MXN (-0.6%) and CNY (-0.3%) were the biggest losers.
• Asian equity markets the Nikkei, Hang Seng and Shanghai Composite are down.

• US House Speaker Kevin McCarthy has noted that he had had a productive talk around the debt ceiling issue with US President Joe Biden yesterday.
• The two reiterated that a default is “off the table” although a deal hasn’t been reached yet.
• Talks will likely continue until an agreement is reached. 
• However, US Treasury Secretary Janet Yellen warned that it is now "highly likely" that her department will run out of sufficient cash in early June and that a default could come as early as 1 June. 

• Two US Fed hawks commented yesterday that the central may need to raise rates further this year, while two others noted their support for restraint. 
• St. Louis Fed President James Bullard expects two more interest rate increases.
• Minneapolis Fed President Neel Kashkari commented that even were the Fed to pause in June, it won’t necessarily imply the end of tightening.
• Atlanta Fed President Raphael Bostic expressed his support for a pause in June.
• Richmond Fed President Thomas Barkin prefers to keep his options open, noting that monetary policy works with a lag.
• These comments follow signals from Fed Chair Jerome Powell last week that a pause at the June FOMC is likely.

• Japan’s manufacturing activity expanded for the first time in seven months in May, while the services sector hit record growth.
• The Jibun Bank manufacturing PMI increased to 50.8 in May, from 49.5 in April.
• Output and new orders returned to expansion for the first time since June 2022.
• The services PMI increased to 56.3 in May, from 55.4 in April.

• Several countries’ manufacturing and services PMI data releases are scheduled for release today.
• The manufacturing PMI in Europe is expected to have increased in May, albeit likely to have remained in contraction; the services PMI is also expected to have improved.
• The UK manufacturing PMI is also struggling to enter expansionary territory; the services PMI is expected to have slipped in May but likely remained in expansion.
• The US manufacturing and services PMI are both expected to have expanded in May.

• Locally, the SARB’s leading indicator for March is due out today; the index slipped to 120.1 in February, from 120.9 in January.
• Eskom: Stage 4 loadshedding is currently in place until 4pm; Stage 5 loadshedding will be implemented then.

• Brent crude oil is up this morning, and down by 11.3% year-to-date.
• The gold price is down this morning, and up by 7.5% year-to-date.

• Brent crude oil is currently at $76.18/bbl; ($75.99/bbl*).
• Gold is at $1959/oz ($1974/oz*).
• SA CDS 316bps*, Brazil 216bps* and Turkey 695bps*.
• Yields: US 10yr at 3.71%*, German bund at 2.45%* and SA 10-year generic at 12.06%*, SA’s R2030 at 11.22%*.

* Denotes yesterday’s close. 

 Key events and data: 

• 08h00: Japan machine tool orders (April – final)
• 09h00: SA SARB leading indicator (March)
• 10h00: Eurozone HCOB manufacturing, services and composite PMI (May), current account (March)
• 10h30: UK S&P Global/CIPS manufacturing, services and composite PMI (May P)
• 15h45: US S&P Global manufacturing, services and composite PMI (May)
• 16h00: US new home sales (April)

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