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Closing the loop 12 October 2021

Closing the loop

Shireen Darmalingam

Market highlights:

  • The rand is stronger at R14.96/$ (R15.02/$*) today; it traded in a range of R14.91/$ to R15.08/$.
  • It is above its 50-day, 100-day and 200-day moving averages (R14.74/$, R14.46/$ and R14.58/$, respectively).
  • EM currencies were mixed today; the THB (+1.3%), COP (+0.6%) and ZAR (+0.3%) were amongst the biggest gainers; the CLP (-0.6%), HUF (-0.5%) and TWD (-0.4%) were amongst the biggest losers.
  • The IMF has lowered its global growth outlook for 2021 to 5.9% (from 6% in July); 4.9% (unchanged) is expected in 2022.
  • The IMF noted that the global recovery continues but has lost momentum on the back of surges in Covid infections.
  • It is more concerned about growth risks, including from the Delta variant, strained supply chains, accelerating inflation and rising costs of food and fuel.
  • It is also concerned about a “dangerous divergence in economic prospects across countries”.
  • Advanced economies are set to expand by 5.2% in 2021 (from 5.6% previously and from a decline of 4.5% in 2020).
  • Emerging markets are expected to grow by 6.4% this year (previous estimate: 6.3%) from a contraction of 2.1% in 2020.
  • US growth is expected at 6.0% in 2021 (from 7.0% previously); growth in the EU is likely to rebound to 5.0% in 2021 from its previous estimate of 4.6%.
  • Sub-Saharan Africa is pencilled in to grow by 3.7% this year (from a decline of 1.8% in 2020).
  • SA GDP growth was revised up to 5% this year (from 4.0% previously) and by 2.2% (unchanged) in 2022.
  • We expect SA GDP growth to rebound to 5.2% this year from the 6.4% contraction in 2020.
  • The IMF provided some comfort to investors concerned about rising inflation; it expects inflation to subside to 2% in advanced economies by mid-2022.
  • However, higher inflation is expected in emerging and developing countries.
  • The market’s attention will be focused on the US FOMC meeting minutes tomorrow.
  • The Fed indicated that it will likely keep rates steady; investors will be looking for clues on the next steps regarding QE tapering.
  • The August UK GDP is scheduled for release tomorrow; expectations are for growth to come in at 3.0% in the 3 months to August from 3.6% in the 3 months to July.
  • Locally, mining production undershot expectations in August coming in at 2.0% y/y from an upwardly revised 12.3% y/y (previously 10.3% y/y) in July.
  • On a m/m basis, production was down by 2.4% in August after having increased by 3.2% in June.
  • The July manufacturing production rebounded in August increasing by 1.8% y/y after having contracted by 4.8% y/y in July.
  • On a m/m basis, manufacturing production was also up, by 7.6% from a decline of 8.4% in July.
  • Retail sales for August is scheduled for release tomorrow and is expected to have increased by 2.0% y/y in August from July’s 0.8% y/y contraction.
  • On a m/m basis, sales are expected to have increased by 9.5% from a decline of 11.2% in July.
  • The oil price is down by 0.3% today and up by 61.0% in the year-to-date.
  • The gold price is up by 0.5% today and down by 7.3% in the year-to-date.
  • Brent crude oil is at $83.42/bbl; ($83.65/bbl*).
  • Gold price is at $1765/oz ($1756/oz*).
  • SA CDS is at 218bps (218bps*), higher than Brazil 207bps (204bps*) and lower than Turkey 442bps (435bps*).
  • Yields: US 10yr at 1.60% (1.61%*), German bund at -0.0.98% (-0.121%*) and SA 10-year generic at 9.99% (9.99%*), SA’s R186 is at 7.93% (7.95%*).
  • The JSE ALSI is down by 0.1% today (+1.3%*).

* Denotes yesterday’s close. 

Key events and data:

  • 01h50: Japan core machine orders (August)
  • 08h00: UK industrial production (August), manufacturing production (August), trade balance (August), GDP (August)
  • 11h00: Eurozone industrial production (August)
  • 13h00: SA retail sales (August)
  • 13h00: US MBA mortgage applications (8 October)
  • 14h30: US CPI (September)
  • 20h00: US FOMC meeting (22 September)
  • China trade balance (September)

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