Closing the loop 19 January 2023

Closing the loop

Shireen Darmalingam

Market highlights:

The rand is weaker at R17.21/$ (R17.12/$*) today; it ranged between R17.08/$ and R17.30/$.
The currency is below its 100-day moving average (R17.52/$) and above its 50-day and 200-day moving averages (R17.17/$ and R16.86/$).
EM currencies are mixed today; the RON (+0.5%), CZK (+0.4%) and HUF (+0.4%) are the biggest gainers; the THB (-0.6%), ZAR (-0.6%) and MXN (-0.5%) are the biggest losers.

World Economic Forum (WEF) update: several European leaders see improvements in expectations for the Eurozone economy this year despite high inflation and the Russia-Ukraine war.
They have however warned that there is still much work to do.
ECB President Christine Lagarde commented today that inflation remains far too elevated.
She noted that the ECB is likely to stay the course until such time that rates have moved into restrictive territory for long enough so that inflation can return to 2% in a timely manner.

The BOE noted today that, according to a survey, UK banks are more hesitant about lending to households than they have been since the global financial crisis.
The bank’s quarterly credit conditions survey reflected that lenders expect to sharply reduce the amount of money they extend for credit cards, car finance and personal loans.
This is the most pessimistic banks have been on future credit availability since the start of the survey in 2007.
This has been driven by rising interest rates and falling real incomes adversely impacting consumer living standards and reducing the ability of many households to repay their debts.
The results of the BOE survey underscore the growing risks for the UK economy.

US housing starts fell to 1,382k in December from 1,401k in November; building permits fell to 1,330k in December from 1,351k in November.
This comes on the back of a cooling in demand as potential home buyers pull out of the market due to affordability.
Existing homes sales are due out tomorrow and are also likely to have slipped in December.

Locally, it was a quiet day as far as data releases were concerned.
Eskom implemented Stage 5 loadshedding at 4pm until 5am; Stage 4 loadshedding will resume then.

Brent crude oil is at $85.30/bbl ($84.98/bbl*).
Gold price is at $1917/oz ($1905/oz*).
SA CDS is at 267bps (247bps*), Brazil 247bps (236bps*), Turkey 567bps (545bps*).
Yields: US 10yr 3.40% (3.36%*), German bund at 2.08% (2.02%*) and SA 10-year generic at 10.47% (10.38%*), SA’s R186 is at 8.20% (8.13%*).
The JSE ALSI is down by 0.6% today (+0.6%*).

* Denotes yesterday’s close.

Key events and data:

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