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In the loop 02 February 2024

In the loop

Shireen Darmalingam

What you should know this morning:

  • The rand is stronger this morning, at R18.57/$, after closing stronger yesterday (R18.60/$*).
  • EM currencies were mixed yesterday; the BRL (+0.9%), COP (+0.7%) and PLN (+0.6%) were the biggest gainers; the RUB (-0.6%), CLP (-0.4%) and CNY (-0.2%) were the biggest losers.
  • Asian equity markets are mixed this morning; the Nikkei and Hang Seng are up, while Shanghai Composite is down.
  • BOE Governor Andrew Bailey noted the risks to inflation in the UK as likely to persist.
  • These pressures are expected to emanate from both the domestic economy as well as internationally; tensions in the Middle East are also likely to add pressure.
  • Bailey added that it might be too early for the central bank to commit to lowering interest rates.
  • He noted that the bank would prefer to see further evidence of inflation being on a sustained path.
  • The BOE’s Decision Maker Panel (DMP) survey showed that one-year-ahead inflation expectations fell to 3.4% in January, from 4% in December
  • The DMP survey is used by the central bank to assess the risks around inflation persisting.
  • Bailey commented that, while economic growth is still subdued, there are some signs of a pickup in activity.
  • The US ISM manufacturing index increased to 49.1 (a 15-month high) in January, from a revised 47.1 in December.
  • The increase was driven by a strongest increase in growth since May 2022.
  • Four industries reported growth in January, while 13 indicated contracting activity.
  • The report suggests that the manufacturing sector is starting to stabilize.
  • Still, the survey results highlighted several hurdles for the manufacturing sector’s recovery.
  • Domestic demand has been relatively steady; however, the export orders gauge has fallen at its fastest rate of contraction since May 2020.
  • The closely watched US non-farm payrolls (NFP) report is in the spotlight today.
  • The NFP are likely to have slowed to 185k in January, from 216k in December.
  • Abnormal weather conditions posed downside risk to non-farm payrolls in January as the colder weather likely weighed on hiring.
  • Annual revisions to the data may also have impacted the numbers in January.
  • The unemployment rate is likely to have increased to 3.8% in January, from 3.7% in December.
  • The University of Michigan sentiment index for January (final estimate) is expected at 78.9, from a previous estimate of 78.8, and up from 69.7 in December.
  • Eskom: Stage 3 loadshedding is currently in place until further notice.
  • Brent crude is up this morning, and up by 2.7% year-to-date.
  • The gold price is unchanged this morning, and down by 0.4% year-to-date.
  • Brent crude oil is currently at $79.10/bbl; ($78.70/bbl*).
  • Gold is at $2054/oz ($2054/oz*).
  • SA CDS 231bps*, Brazil 138bps* and Turkey 334bps*.
  • Yields: US 10yr at 3.88%*, German bund at 2.14%* and SA 10-year generic at 11.06%*, SA’s R2030 at 9.70%*.

* Denotes yesterday’s close.

Key events and data:

  • 15h30: US non-farm payrolls (January), unemployment rate (January)
  • 17h00: US University of Michigan sentiment, 1 yr and 5-10 yr inflation expectations (January – final)
  • 17h00: US factory orders (December), durable goods orders (December – final)

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