Closing the loop 17 August 2022

Closing the loop

Shireen Darmalingam

Market highlights:

The rand is weaker at R16.66/$ (R16.40/$*) today; it ranged between R16.35/$ and R16.68/$.
The currency is above its 50-day, 100-day and 200-day moving averages (R16.48/$, R15.97/$ and R15.71/$).
EM currencies are mixed today; the RUB (+0.9%), HUF (+0.3%) and INR (+0.3%) are the biggest gainers; the ZAR (-1.5%), COP (-1.3%) and CLP (-1.0%) are the biggest losers.

The UK CPI overshot expectations in July increasing to 10.1% y/y from 9.4% y/y in June.
Core CPI also edged higher to 6.2% y/y in July from 5.8% y/y in June.
CPI, at double digits for the first time in 40 years, was driven by rising food prices in July.
The data suggests that inflationary pressures are spreading beyond soaring energy prices and intensifies the squeeze on consumers.
It also adds to pressure for action from the BOE when it meets next month; investors are pricing another 50 bps rate rise at the September MPC meeting.

US retail sales stagnated in July after having increased by 0.8% m/m in June.
Sales excluding gas and autos came in at 0.7% m/m in July, the same as in June.
The sharp decline in gasoline prices in July has boosted sentiment and freed up cash to spend elsewhere.
However, widespread and persistently high inflation is eroding workers’ spending power.
It has also forced consumers to spend on credit cards and to tap into their savings.
Investors are still awaiting the US FOMC meeting minutes later this evening for further guidance on the path of monetary policy.

Locally, retail sales for June fell more than expected by 2.5% y/y following a 0.1% y/y gain in May.
On a m/m basis, retail sales were down by 0.4% in June after having fallen by 1.2% m/m in May.
Eskom has announced that it will implement Stage 2 loadshedding from 4pm until midnight today and tomorrow.
SARB Governor Lesetja Kganyago commented today that SA should adopt the Financial Action Task Force (FATF) guidelines to avoid greylisting.
Kganyago also noted that to avoid being greylisted entails more than just what the Prudential Authority (PA) is doing.
It also includes, among other things, law enforcements and prosecution agencies.

Brent crude oil is at $93.46/bbl ($92.34/bbl*).
Gold price is at $1768/oz ($1776/oz*).
SA CDS is at 272bps (263bps*), Brazil 259bps (253bps*), Turkey 738bps (723bps*).
Yields: US 10yr at 2.88% (2.80%*), German bund at 1.083% (0.97%*) and SA 10-year generic at 10.65% (10.55%*), SA’s R186 is at 8.74% (8.65%*).
The JSE ALSI is down by 1.0% today (+1.1%*).

* Denotes yesterday’s close.

Key events and data:

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