Closing the loop

Market highlights:

• The rand is stronger at R19.59/$ (R19.79/$*) today; it ranged between R19.53/$ and R19.84/$.
• The currency is above its 50-day, 100-day and 200-day moving averages (R18.50/$, R18.12/$ and R17.82/$).
• EM currencies are mixed today; the ZAR (+1.0%), MXN (+0.8%) and BRL (+0.7%) were the biggest gainers; the PLN (-0.4%), TRY (-0.2%) and THB (-0.2%) were the biggest losers. 

• The rand gained ground today after it plummeted yesterday following the news of the SARB’s 50 bps hike in the repo rate.
• SARB Governor Lesetja Kganyago noted yesterday that the rand has also come under pressure because of power outages and logistics network constraints that sapped economic growth.
• The slow pace of economic reforms and concerns about a deterioration in fiscal metrics are also key players.
• Governor Kganyago noted the SARB will not directly intervene in the currency market.
• SA President Cyril Ramaphosa today allocated a range of powers to Electricity Minister Dr Kgosientsho Ramakgopa to enable him to address the nation’s energy crisis.
• The minister will now be able to determine which energy sources should be used to generate additional electricity. 
• Minister Ramakgopa has also been granted the authority to enable private sector participation in the procurement of new capacity.
• Parliament approved the Eskom Debt Relief Bill today that seeks to provide for a government takeover of $13bn of Eskom’s $22bn debt.
• The bill now goes to the National Council of Provinces for consideration.

• The power utility has urged consumers to delay charging their inverter systems in an attempt to reduce demand on the grid as this could risk adding another stage of loadshedding during peak periods.
• Eskom also noted that “if unplanned outages average 18,000MW for the winter period, loadshedding will be required every day and will be implemented up to Stage 8”.
• Stage 5 loadshedding is currently in place until 5 am; Stage 3 loadshedding will be implemented then.
• Varying stages of loadshedding will be implemented over the weekend.

• ECB Chief Economist Philip Lane commented today that wages are rising in a “moderate way” even though recent negotiations have led to pay rises of more than 5%.
• Lane also noted that the central bank’s battle with inflation is nearing a crucial stage but there’s still work to be done.
• Lane, however, expects inflation to turn the corner soon.
• “The reversal of energy prices will feed into core, but timing is uncertain.”

• The US core personal consumption expenditure deflator, the Fed’s preferred inflation gauge, increased for a third consecutive month, by 0.4% m/m in April. 
• The core PCE deflator increased by 4.7% y/y in April after having increased by 4.6% y/y in March. 
• The Fed’s inflation target is 2% based on a broader measure but it views the core gauge as a better indicator of the trend.
• Today’s data will likely do little to reassure the Fed before the next FOMC meeting that prices are moderating.

• The oil price is up by 1.1% today, and down by 10.3% in the year-to-date.
• The gold price is up by 0.1% today, and up by 6.7% in the year-to-date.

• Brent crude oil is at $77.09/bbl ($76.26/bbl*).
• Gold price is at $1945/oz ($1943/oz*). 
• SA CDS is at 320bps (321bps*), Brazil 211bps (213bps*), Turkey 670bps (673bps*).
• Yields: US 10yr 3.83% (3.81%*), German bund at 2.53% (2.52%*) and SA 10-year generic at 11.95% (11.99%*), SA’s R2030 is at 11.10% (11.10%*).
• The JSE ALSI is up by 0.3% today (+0.7%*).

* Denotes yesterday’s close. 

Key events and data:

• On Monday: 07h00: Japan leading and coincident indices (March – final)

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