In the loop 06 June 2023

In the loop

Shireen Darmalingam

What you should know this morning:

The rand is stronger this morning, at R19.22/$, after closing stronger yesterday (R19.29/$*).
EM currencies were mixed yesterday; the COP (+1.6%), ZAR (+1.2%) and IDR (+0.7%) were the biggest gainers; the TRY (-1.5%), ARS (-0.7%) and PHP (-0.6%) were the biggest losers.
Asian equity markets are mixed this morning; the Nikkei and Hang Seng are up while the Shanghai Composite is down.

The US services sector slowed in May as new orders softened and businesses are concerned about an economic slowdown.
The ISM serves PMI fell to 50.3 in May, from 51.9 in April, missing expectations for an increase to 52.2.
The employment activity index contracted in May after three months of growth.
Companies are retaining workers and delaying hiring new workers due to economic uncertainty.
While some respondents indicated business conditions as stable, demand is easing.

Former US Treasury Secretary Lawrence Summers suggested that if the Fed pauses its rate hiking cycle in June, the Fed should be open to a 50 bps increase in July.
Summers noted that “the risks of overheating the economy are the primary risks that the Fed needs to be mindful of”.
Summers, however, noted that given the robust state of the economy, he felt the “lower risk strategy” was for the Fed to raise rates next week.
The Fed is currently in a closed period ahead of its 13-14 June FOMC meeting.

The Reserve Bank of Australia (RBA) unexpectedly hiked its benchmark interest rate by 25bps, to 4.10%.
The RBA noted that it is still “seeking to keep the economy on an even keel as inflation returns to the 2–3 per cent target range”.
The central bank also commented that further action may be required to ensure that inflation returns to target in a reasonable timeframe.
The Central Bank of Poland will meet today to decide on monetary policy; the central bank is expected to keep interest rates unchanged.

Eurozone retail sales for April are scheduled for release today, likely declining by 3.0% y/y in April, following March’s decline of 3.8% y/y.
On a m/m basis, retail sales are likely to have increased by 0.2% in April, after having declined by 1.2% in March.

Locally, GDP growth for Q1:23 is in the spotlight today and is expected at 0.4% 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.
Eskom: There is no loadshedding between 8am and 4pm today; Stage 4 loadshedding will be implemented at 4pm.

Brent crude oil is currently at $76.50/bbl; ($76.71/bbl*).
Gold is at $1959/oz ($1958/oz*).
SA CDS 286bps*, Brazil 202bps* and Turkey 503bps*.
Yields: US 10yr at 3.68%*, German bund at 2.38%* and SA 10-year generic at 11.90%*, SA’s R2030 at 11.09%*.

* Denotes yesterday’s close.

Key events and data:

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