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Closing the loop 24 November 2021

Closing the loop

Shireen Darmalingam

Market highlights:

  • The rand is weaker, at R15.93/$ (R15.84/$*) today; it ranged between R15.80/$ and R15.97/$.
  • The currency is above its 50-day, 100-day and 200-day moving averages (R15.07/$, R14.83/$ and R14.60/$ respectively).
  • EM currencies were mixed today; the TRY (+5.5%), CLP (+0.5%) and PHP (+0.5%) were amongst the biggest gainers; the MXN (-1.2%), RUB (-0.8%) and THB (-0.7%) were amongst the biggest losers.
  • US GDP (second estimate) for Q3:21 was revised up to 2.1% q/q (annualised) from 6.7% q/q (annualised) in Q2:21.
  • Improved growth was driven by an increase in consumer spending which grew by 1.7% in Q3:21.
  • Despite the improved print, headwinds such as supply chain bottlenecks, rising prices and a collapse in sentiment threatens to constrain household spending.
  • Growth could also be further weighed on by the resurgence in Covid infections.
  • The ECB’s October MPC meeting minutes are due out tomorrow.
  • Most policymakers expect the current surge in inflation to subside in 2022.
  • The bank is expected to keep the benchmark lending rate at 0% through to Q3:24.
  • Investors will be keeping an eye on policy guidance ahead of the December MPC meeting as the committee is expected to make decisions around its tapering programme.
  • ECB President Christine Lagarde signalled at the October meeting that tapering would likely end in March 2022.
  • Locally, the BER’s business confidence index remained unchanged at 43 pts in Q4:21, following the Q3:21 unrest.
  • Confidence amongst manufacturers and retailers slipped in Q4:21 while building sentiment improved.
  • The BER noted that sentiment was supported by the relaxing of lockdown measures to Level 1.
  • However, a 3-week strike in the steel industry as well as the resumption of loadshedding and the ongoing supply-chain disruptions prevented sentiment from recovering.
  • The BER further remarked that stock shortages and rising costs are holding back the economic recovery.
  • Vaccine hesitancy and the anticipated fourth wave could also weigh on sentiment in 2022.
  • PPI for October is scheduled for release tomorrow and is expected to have increased to 8.0% y/y from 7.8% y/y in September.
  • On a m/m basis, PPI is expected to have increased by 0.6% in October from September’s increase of 0.9%.
  • The oil price is down by 0.5% today, and up by 58.2% in the year-to-date.
  • The gold price is down by 0.1% today, and down by 6.1% in the year-to-date.
  • Brent crude oil is at $81.93/bbl; ($82.31/bbl*).
  • Gold price is at $1781/oz ($1784/oz*).
  • SA CDS is at 222bps (222bps), lower than Brazil 248bps (248bps*) and Turkey 471bps (487bps*).
  • Yields: US 10yr at 1.68% (1.66%*), German bund at -0.204% (-0.220%*) and SA 10-year generic at 10.17% (10.08%*), SA’s R186 is at 8.15% (8.09%*).
  • The JSE ALSI is down by 0.9% today (+0.2%*).

* Denotes yesterday’s close. 

Key events and data:

  • 07h00: Japan leading and coincident indices (September)
  • 08h00: Japan machine tool orders (October)
  • 11h30: SA PPI (October)
  • 14h30: Eurozone ECB publishes October MPC minutes 

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