Closing the loop

Market highlights:

• The rand is stronger at R15.87/$ (R15.90/$*) today; it ranged between R15.86/$ and R16.05/$.
• The currency is above its 50-day, 100-day and 200-day moving averages (R15.72/$, R15.35/$ and R15.37/$).
• EM currencies are mixed today; the RUB (+1.4%), MXN (+0.6%) and RON (+0.3%) are the biggest gainers; the PLN (-1.0%), CLP (-0.7%) and THB (-0.5%) at the biggest losers.  

• UK CPI registered in line with expectations in May and increased to a new 40-year high of 9.1% y/y following April’s 9.0% y/y increase.
• The increase was broad-based with prices of everything from fuel and electricity to food and beverages increasing in May.
• Inflation is expected to rise even further when another energy price hike kicks in later this year.
• The BOE expects CPI to rise above 11% by October.
• Retail prices increased more than expected in May to 11.7% y/y from 11.1% y/y in April.
• Prices are also starting to build at the wholesale level; raw material costs increased the most on record in May.
• Interest rates are expected to rise further following five straight hikes so far this year.

• Japan, Eurozone, UK and US PMIs for June are due out tomorrow and may show further weakening in their respective manufacturing and services sectors.
• Turkey’s central bank meets tomorrow and is expected to keep rates unchanged.

• Locally, CPI overshot expectations in May coming in at 6.5% y/y, a 5-year high, from April’s 5.9% y/y increase.
• The upside surprise emanated largely from food and fuel prices.
• On a m/m basis, CPI increased by 0.7% in May from an increase of 0.6% in April.
• The upward drift in core and services inflation remains gradual.
• Core CPI increased to 4.1% y/y in May from 3.9% y/y in April.
• Today’s higher-than-expected print lifts our medium-term inflation trajectory noticeably.
• We now expect the SARB to hike the repo rate in 50 bps increments at the next two meetings before reverting to 25 bps increments.

• Eskom implemented Stage 2 loadshedding from 10h00 until midnight.
• Stage 2 loadshedding will continue tomorrow through to Sunday from 05h00 until midnight.
• This comes as the utility noted that four generation units broke down.
• Eskom also noted that there is a “likelihood” that more megawatts might be cut from the grid during the evening peaks.

• Cabinet is expected to meet tomorrow around the scrapping of all remaining Covid-19 restrictions under the recommendation of the health minister.
• This includes the compulsory wearing of masks in indoor spaces and on public transport.

• The oil price is down by 5.4% today, and up by 39.5% in the year-to-date.
• The gold price is up by 0.4% today, and up by 0.8% in the year-to-date.

• Brent crude oil is at $108.51/bbl ($114.65/bbl*).
• Gold price is at $1843/oz ($1836/oz*). 
• SA CDS is at 286bps (281bps*), Brazil 286bps (280bps*), Turkey 809bps (808bps*).
• Yields: US 10yr at 3.14% (3.27%*), German bund at 1.60% (1.77%*) and SA 10-year generic at 10.64% (10.63%*), SA’s R186 is at 8.59% (8.57%*).
• The JSE ALSI is down by 2.0% today (+0.6%*).

* Denotes yesterday’s close. 

Key events and data:

• 02h30: Japan Jibun Bank manufacturing, services and composite PMI (June)
• 10h00: Eurozone S&P Global manufacturing, services and composite PMI (June), ECB publishes Economic Bulletin
• 10h30: UK S&P Global manufacturing, services and composite PMI (June)
• 14h30: US current account balance (Q1:22), initial jobless claims (18 June)
• 15h45: US S&P Global manufacturing, services and composite PMI (June)

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