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Closing the loop 15 August 2022

Closing the loop

Shireen Darmalingam

Market highlights:

  • The rand is weaker at R16.40/$ (R16.16/$*) today; it ranged between R16.18/$ and R16.42/$.
  • The currency is below its 50-day moving average (R16.43/$) and above its 100-day and 200-day moving averages (R15.91/$ and R15.69/$).
  • EM currencies are largely down today; the HUF (-2.%), ZAR (-1.4%) and PLN (-1.3%) are the biggest losers.
  • The US Empire manufacturing index fell more than expected in August to -31.3 from 11.1 in July.
  • This manufacturing gauge has been volatile this year following solid growth last year.
  • Sharp declines in new orders and shipments were the main drivers of the massive fall in August.
  • The share of factories that reported weaker business conditions almost doubled in August to 43.6%.
  • The prices-paid index fell in August to its lowest since the beginning of 2021.
  • The 6-month forward looking gauge, however, improved slightly to 2.1 in August from -6.2 in July.
  • The NAHB housing market index slipped to 49 in August from 55 in July.
  • The index has been impacted by a deterioration in demand on the back of affordability.
  • More US housing market data are on the cards for tomorrow.
  • Housing starts for July are due for release tomorrow and are expected to have eased on lower demand for housing amid rising mortgage costs.
  • Building permits are also expected to come in lower in July.
  • The UK’s ILO unemployment rate for the three months to June is due out tomorrow and is expected to have remained unchanged at 3.8% from the previous three months.
  • Wage growth is expected to have moderated to 4.5% in the three months to June compared to 6.2% in the 3 months to May.
  • This is well above the rate (3% -3.5%) that is consistent with the BOE’s 2% inflation target.
  • Wage growth is expected to moderate in H2:22.
  • The BOE will watch the labour market data closely for any indication that inflation is becoming more persistent.
  • The BOE could hike rates by 50 bps next month should the data warrant it.
  • Locally, it was a quiet day as far as data releases were concerned.
  • The oil price is down by 4.8% today, and up by 20.2% in the year-to-date.   
  • The gold price is down by 1.5% today, and down by 2.9% in the year-to-date.
  • Brent crude oil is at $93.46/bbl ($98.15/bbl*).
  • Gold price is at $1776/oz ($1802/oz*). 
  • SA CDS is at 242bps (234bps*), Brazil 248bps (248bps*), Turkey 672bps (657bps*).
  • Yields: US 10yr at 2.76% (2.83%*), German bund at 0.90% (0.99%*) and SA 10-year generic at 10.49% (10.38%*), SA’s R186 is at 8.62% (8.58%*).
  • The JSE ALSI is up by 0.1% today (-0.8%*).

* Denotes Friday’s close. 

Key events and data:

  • 06h30: Japan tertiary industry index (June)
  • 08h00: UK ILO unemployment rate (June)
  • 11h00: Eurozone ZEW survey expectations (August)
  • 14h30: US building permits, housing starts (July)
  • 15h15: US industrial and manufacturing production, capacity utilisation (July)

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