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In the loop 05 June 2023

In the loop

Shireen Darmalingam

What you should know this morning:

  • The rand is weaker this morning, at R19.55/$, after closing stronger on Friday (R19.52/$*).
  • EM currencies were mixed on Friday; the KRW (+1.2%), BRL (+1.1%) and COP (+1.1%) were the biggest gainers; the TRY (-0.5%), BGN (-0.5%) and RON (-0.4%) were the biggest losers.
  • Asian equity markets the Nikkei, Hang Seng and Shanghai Composite are up. 
  • US debt ceiling bill: President Joe Biden signed the debt ceiling bill into law over the weekend, thereby averting a default.
  • The US ISM services gauge for May, due out today, should signal continued demand for a variety of services; the index is expected to have increased to 52.5 in May, from 51.9 in April.
  • The trade deficit for April, scheduled for release on Wednesday, likely widened after advance economic indicators showed a substantial downside surprise in the US’s net exports of goods.
  • With the debt ceiling deal now resolved, the focus will shift to the FOMC meeting next week. 
  • With the data so far mostly surprising to the upside, the case to pause rates has dimmed.
  • The week ahead will likely bring new signals that China’s economic recovery remains weak. 
  • China’s trade, inflation and credit numbers are expected to add to concerns about a sputtering post-Covid recovery.
  • China’s trade data for May, due out on Wednesday, is expected to show export growth stalling again, reflecting weaker external demand.
  • Imports may also have fallen at a faster rate, tracking the downturn in domestic demand for goods and declines in commodity prices.
  • CPI and PPI for May are due out on Friday; near-zero CPI inflation and deeper deflation at the factory gate will reinforce the need for additional stimulus from the PBOC.
  • The Reserve Bank of Australia will meet on Tuesday and is expected to keep rates on hold, at 3.85%.
  • The recent upside surprise in inflation is unlikely to prompt the bank into tightening further.
  • The Reserve Bank of India will probably hold rates at 6.5% on Thursday.
  • The final estimate for Eurozone GDP for Q1:23 is due out on Thursday.
  • Downward revisions to the German figures for Q1:23 could prompt Eurostat to nudge down GDP growth estimate for this region.
  • Germany’s industrial production for April will be closely watched after the slump in March added downside risks to growth for Q2:23. 
  • The central banks of Poland and Turkey meet this week to decide on monetary policy. 
  • Both banks are likely to keep their benchmark policy rates unchanged.
  • Locally, the industry-wide PMI for May is scheduled for release today and is expected to have slipped further, to 49, from 49.6 in April.
  • GDP growth for Q1:23, due out tomorrow, is expected at 0.3% q/q (sa), from -1.3% q/q (sa) in Q4.22.
  • On a y/y basis, GDP growth is expected at 0.1% in Q1:23, from 0.9% y/y in Q4:22.
  • The SARB’s gross and net reserves for May are due out on Wednesday. 
  • Net reserves are expected to have increased to $55.16bn in May, from $55.37bn in April.
  • The current account for Q1:23 is due for release on Thursday; the deficit likely widened to 2.8% of GDP in Q1:23, from a deficit of 2.6% of GDP in Q4:22.
  • Manufacturing production for April, also due on Thursday, is expected to have increased by 2.0% y/y, from a 1.1% y/y decline in March.
  • Eskom: There is no loadshedding currently until 4pm; Stage 4 loadshedding follows at 4pm.
  • Oil surged after Saudi Arabia said that it would cut an extra 1 million barrels per day in output in July.
  • This will take Saudi Arabia’s production to the lowest in several years.
  • OPEC+ pledged to maintain existing cuts until the end of 2024; Russia didn’t commit to further cuts.
  • Brent crude oil is up this morning, and down by 10.3% year-to-date.
  • The gold price is down this morning, and up by 6.6% year-to-date.
  • Brent crude oil is currently at $77.12/bbl; ($76.13/bbl*).
  • Gold is at $1944/oz ($1947/oz*).
  • SA CDS 295bps*, Brazil 205bps* and Turkey 555bps*.
  • Yields: US 10yr at 3.71%*, German bund at 2.31%* and SA 10-year generic at 12.03%*, SA’s R2030 at 11.23%*.

* Denotes Friday’s close. 

 Key events and data: 

  • 09h15: SA industry-wide PMI (May)
  • 10h00: Eurozone HCOB services and composite PMI (May – final)
  • 10h30: Eurozone Sentix investor confidence (June)
  • 10h30: UK S&P Global/CIPS services and composite PMI (May – final)
  • 11h00: Eurozone PPI (April)
  • 15h45: US S&P Global services and composite PMI (May – final)
  • 16h00: US factory orders (April), durable goods orders (April – final), ISM services (May)

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