In the loop 09 January 2025

In the loop

Christelle Grobler

What you should know this morning:

The rand is trading at R18.93/$ this morning, after closing weaker yesterday (R18.92/$*).
EM currencies were mixed yesterday; the ZAR (-1.2%), PLN (-0.9%) and BGN (-0.6%) lost the most; the RUB (+2.6%), COP (+0.3%) and CLP (+0.3%) gained the most.
Asian equity markets, the Nikkei, Hang Seng and Shanghai Composite are down this morning.

China’s CPI barely increased in December; CPI was up only 0.1% y/y, down from 0.2% in November.
This is the fourth straight month of lower consumer inflation, thereby stoking fears of deflation returning.
Core CPI inflation, which excludes volatile food and fuel prices, rose for a third month, to 0.4% y/y – the highest since July.
The increase in core inflation likely points to some impact from the stimulus measures implemented last year to boost domestic demand.
Factory gate prices continued to fall, but at a slower pace.
The PPI recorded a decline of 2.3% y/y in December, after falling 2.5% y/y in November.

The minutes of the December FOMC meeting confirmed that the decision to cut rates by 25 bps was “finely balanced”.
Officials were focused on risks to the outlook, after data showed upside surprises on inflation and a solid growth performance.
Assumptions about the possible implications of any trade policy changes under incoming President Trump were incorporated by some policymakers.
The committee clearly views uncertainty as having increased and plans to navigate this with a cautious approach to future policy moves.

ECB Governing Council member Francois Villeroy de Galhau advocated for further rate cuts until the neutral rate is reached.
This is, however, premised on the inflation retreat matching forecasts.
The ECB will be meeting in a few weeks and is expected to cut the benchmark rate by 25 bps.
Despite inflation accelerating for a third month in December, officials are confident that their target, to reach inflation of 2% sustainably, will be achieved by the end of this year.
“The slight rise in December was expected, and does not call into question the ongoing victory over inflation”, Villeroy said.
The ECB will publish its Economic Bulletin later this morning.

Locally, manufacturing production data for November is due today.
During October, manufacturing production increased 0.4% m/m, resulting in a 0.8% y/y increase.
Manufacturing PMI data implies softer production data for November and December.

Brent crude oil is currently at $76.02/bbl; ($76.16/bbl*).
Gold is at $2659/oz ($2656/oz*).
SA CDS 197bps*, Brazil 193bps* and Turkey 268bps*.
Yields: US 10yr at 4.69%*, German bund at 2.55%*, SA 10-year generic at 10.39%*, SA’s R2035 at 10.42%*.

* Denotes yesterday’s close.

Key events and data:

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