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In the loop 12 August 2022

In the loop

Shireen Darmalingam

What you should know this morning:

  • The rand is weaker this morning, at R16.24/$, after closing stronger yesterday (R16.20/$*).
  • EM currencies were mixed yesterday; the RUB (+1.2%), THB (+1.1%) and COP (+1.1%) were the biggest gainers; the BRL (-1.2%), TRY (-0.4%) and CNY (-0.3%) were the biggest losers.
  • Asian equity markets are mixed this morning; the Nikkei and Hang Seng are up, while the Shanghai Composite is down.   
  • UK GDP tor Q2:22 is scheduled for release today; a contraction of 0.2% q/q is expected, from an increase of 0.8% q/q in Q1:22.
  • Despite the expected contraction, this GDP will still be about 1% above the pre-pandemic level.
  • However, growth momentum has started to turn down.
  • The UK may return to some growth in Q3:22 but the BOE still foresees a recession in Q4:22.
  • The BOE expects the recession to be equivalent in scale to the one in the 1990s as the cost-of-living crisis worsens.
  • Russia’s GDP for Q2:22 (due out today) is expected to have contracted by 4.7% q/q in Q2:22, from an increase of 3.5% q/q in Q1:22.
  • Growth would have faced the damage from sanctions due to the Ukraine war.
  • Data suggests that Russia’s trade, manufacturing and the financial sectors may have been the hardest hit.
  • This due to deteriorating business confidence and sanctions-driven disruptions to supply chains.
  • Russia’s economic recovery is only expected by H1:23. 
  • It has been estimated that by then Russia might have sacrificed the equivalent of an estimated five years’ growth.
  • San Francisco Fed President Mary Daly sees the Fed hiking rates by 50 bps in September.
  • She added that the softer-than-expected July CPI outcome was welcomed and that it may now be appropriate for the Fed to start slowing interest rate increases.
  • However, she remains open to a larger increase of 75 bps at that meeting should it be necessary.
  • Locally, no notable data releases are due today.
  •  
  • Brent crude oil is down this morning, and up by 27.4% year-to-date.
  • The gold price is up this morning, and down by 2.0% year-to-date.
  • Brent crude oil is currently at $99.09/bbl; ($99.60/bbl*).
  • Gold is at $1791/oz ($1788/oz*).
  • SA CDS 228bps*, Brazil 240bps* and Turkey 646bps*.
  • Yields: US 10yr at 2.85%*, German bund at 0.97%* and SA 10-year generic at 10.42%*, SA’s R186 at 8.53%*.

* Denotes yesterday’s close. 

 Key events and data: 

  • 08h00: UK GDP (Q2:22), industrial production, manufacturing production (June), trade balance (June)
  • 11h00: Eurozone industrial production (June)
  • 16h00: US University of Michigan sentiment, 1 yr and 5-10 yr inflation expectations (August)
  • 18h00: Russia GDP (Q2:22)

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