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Closing the loop 19 October 2021

Closing the loop

Shireen Darmalingam

Market highlights:

  • The rand is stronger at R14.56/$ (R14.68/$*) today; it traded in a range of R14.53/$ to R14.70/$.
  • It is below its 50-day moving average (R14.75/$) and above its 100-day and 200-day moving averages (R14.51/$ and R14.56/$, respectively).
  • EM currencies were mixed today; the ZAR (+0.9%), CNY (+0.7%) and KRW (+0.7%) were amongst the biggest gainers; the BRL (-0.6%), TRY (-0.1%) and ARS (-0.1%) were amongst the biggest losers.
  • US housing starts and building permits undershot expectations in September.
  • Housing starts fell by 1.6% m/m to 1.56 million (annualised) and was driven by a pullback in construction, supply chain constraints and elevated costs of building materials.
  • Building permits fell by 7.7% m/m to 1.59 million (annualised).
  • The housing report also noted that builders are making little progress on backlogs.
  • The NAHB housing market index, however, saw builder sentiment rising to a 3-month high in October.
  • The increase in sentiment came despite house price increases impacting affordability across the industry.
  • The People’s Bank of China meets tomorrow to decide on rates; no change is expected.
  • Slowing growth and softer inflation, however, provides room for the central bank to ease policy.
  • Japan’s trade balance for September is due out tomorrow; the deficit is expected to have expanded on the back of slowing exports.
  • Looking ahead, exports are expected to drop further on the back of softer Chinese demand and disruptions to automobile production.
  • Locally, the September CPI is expected at 5.0% y/y following a 4.9% y/y increase in August.
  • The quarterly survey of the rental category is expected to have been the major driver of consumer inflation for September.
  • There is additional near-term forecast risk from food and fuel prices that have recently exceeded our expectations.
  • However, we still expect both food and fuel inflation to moderate in the medium term.
  • The oil price is down by 0.2% today and up by 62.6% in the year-to-date.
  • The gold price is up by 0.2% today and down by 6.7% in the year-to-date.
  • Brent crude oil is at $84.20/bbl; ($84.33/bbl*).
  • Gold price is at $1770/oz ($1766/oz*).
  • SA CDS is at 209bps (214bps), higher than Brazil 208bps (205bps*) and lower than Turkey 446bps (454bps*).
  • Yields: US 10yr at 1.61% (1.60%*), German bund at -0.103% (-0.148%*) and SA 10-year generic at 9.81% (9.90%*), SA’s R186 is at 7.93% (7.98%*).
  • The JSE ALSI is up by 0.1% today (-0.4%*).

* Denotes yesterday’s close. 

Key events and data:

  • 01h50: Japan trade balance (September)
  • 03h30: China PBoC MPC meeting – no change expected
  • 08h00: UK CPI, PPI, RPI (September)
  • 10h00: SA CPI (September)
  • 10h00: Eurozone current account balance (August)
  • 10h30: UK house price index (August)
  • 11h00: Eurozone CPI (September)
  • 13h00: US MBA mortgage applications (15 October)
  • 20h00: US Fed Beige Book

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