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Closing the loop 19 November 2021

Closing the loop

Shireen Darmalingam

Market highlights:

  • The rand is weaker, at R15.66/$ (R15.61/$*) today; it ranged between R15.53/$ and R15.78/$.
  • The currency is above its 50-day, 100-day and 200-day moving averages (R14.98/$, R14.79/$ and R14.58/$ respectively).
  • EM currencies were largely down today; the HUF (-1.1%), CZK (-0.9%) and PLN (-0.8%) were amongst the biggest losers.
  • UK retail sales overshot expectations in October increasing by 0.8% m/m after remaining steady in September.
  • Sales, however, contracted on an annual basis by 1.3% in October from a contraction of 0.6% in September.
  • The m/m boost reflected improved confidence about the labour market which increased consumers’ willingness to spend.
  • Households may also have brought Christmas spending forward to October and November.
  • The improvement in sales in October bodes well for Q4:21 GDP growth.
  • It also strengthens the case for an interest rate hike at the December meeting,
  • Several countries in Europe are retreating as they head into a 4th wave of the pandemic.
  • Next week’s survey data will likely shed light on the economic impact of the rising infection rates in Europe.
  • The composite PMI for the euro area and the UK will provide insight that the economic recoveries may be waning.
  • The German IFO business survey will also provide more clues about how the economy is dealing with the severe supply chain disruptions and rising energy costs.
  • The minutes of the ECB’s October MPC meeting will be watched closely.
  • US manufacturing and services PMI data for November are due out next week and are expected to have improved somewhat.
  • Locally, Moody’s and S&P will provide their latest sovereign credit reviews of SA later today.
  • We expect the ratings to remain unchanged: Moody’s Ba2 (negative outlook), S&P BB- (stable outlook)
  • Improvements in key fiscal metrics have reduced the immediate downward pressure on SA’s sovereign credit ratings.
  • However, longer-term risks persist.
  • The oil price is down by 1.6% today, and up by 54.1% in the year-to-date.
  • The gold price is down by 0.1% today, and down by 2.3% in the year-to-date.
  • Brent crude oil is at $79.99/bbl; ($81.24/bbl*).
  • Gold price is at $1858/oz ($1860/oz*).
  • SA CDS is at 203bps (201bps), lower than Brazil 240bps (238bps*) and Turkey 448bps (448bps*).
  • Yields: US 10yr at 1.53% (1.58%*), German bund at -0.330% (-0.275%*) and SA 10-year generic at 9.91% (9.87%*), SA’s R186 is at 7.98% (7.96%*).
  • The JSE ALSI is down by 1.1% today (-0.1%*).

* Denotes yesterday’s close. 

Key events and data:

  • On Monday: 17h00: Eurozone consumer confidence (November)
  • 17h00: US existing home sales (October)

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