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In the loop 21 June 2022

In the loop

Shireen Darmalingam

What you should know this morning:

  • The rand is marginally stronger this morning, at R16.03/$, after closing weaker yesterday (R16.04/$*).
  • EM currencies were mixed yesterday; the RUB (+3.9%), PLN (+0.8%) and the HUF (+0.8%) were the biggest gainers; the CLP (-0.8%), BRL (-0.7%) and PHP (-0.6%) were the biggest losers.
  • Asian equity markets the Nikkei, Hang Seng and Shanghai Composite are up.   
  • With talks of a US recession gathering pace, US President Joe Biden however commented yesterday that “a US recession isn’t inevitable”.
  • President Biden and congressional Democrats are in talks about legislation, aiming to fight inflation and revive parts of Biden’s agenda.
  • Biden has indicated a medical care package as in the pipeline, with a reduction in the cost of insulin as a key feature.
  • Investments in both clean energy and fossil fuels are also being discussed.
  • The economic plan will aim to reduce the US budget deficit; there’s also likely to be increased taxes on the wealthy, corporations, or both. 
  • St. Louis Fed President James Bullard commented that inflation expectations could become “unmoored without credible Fed action”.
  • This could then lead to a “new regime of high inflation and volatile real economic performance”.
  • Bullard further noted that the current economic situation is adding strain to the Fed’s inflation-fighting credibility.
  • Indeed, Cleveland Fed President Loretta Mester noted that the risk of a US recession is increasing.
  • And, it could take several years for inflation to return to the central bank’s 2% target.
  • ECB President Christine Lagarde aims to hike rates next month, and again in September.
  • However, she noted that the risks to financial stability have increased since January. 
  • The ECB’s Philip Lane noted that the magnitude of the September hike is currently undecided.
  • The RBA MPC meeting minutes have flagged further rate hikes.
  • Governor Philip Lowe noted that rates are likely to go up by 25-50 bps in August, the same as in June.
  • The bank will have data on Q2:22 inflation as well as quarterly economic forecasts ahead of that meeting.
  • SA has the 30th highest Covid caseload, at 3.986 million; 291 new cases were reported yesterday.
  • 18.281 million people, or 45.94% of the SA adult population, have been fully vaccinated.
  • The SARB leading indicator for April is due out this morning; the index increased to 128 pts in March, from 127.2 pts in February.
  • Eskom will continue Stage 2 loadshedding from 17h00 to 22h00 today.
  • Brent crude oil is up this morning, and up by 48.3% year-to-date.
  • The gold price is up slightly this morning, and up by 0.4% year-to-date.
  • Brent crude oil is currently at $115.38/bbl; ($113.12/bbl*).
  • Gold is at $1836/oz ($1835/oz*).
  • SA CDS 285bps*, Brazil 284bps* and Turkey 821bps*.
  • Yields: US 10yr at 3.22%*, German bund at 1.74%* and SA 10-year generic at 10.69%*, SA’s R186 at 8.66%*.

* Denotes yesterday’s close.

Key events and data: 

  • 09h00: SA leading indicator (April)
  • 10h00: Eurozone current account (April)
  • 16h00: US existing home sales (May)

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