In the loop

What you should know this morning:

• The rand is trading at R18.27/$ this morning, after closing stronger yesterday (R18.18/$*).
• EM currencies were mixed yesterday; the RUB (+0.6%), ZAR (+0.4%) and PLN (+0.1%) gained the most; the CLP (-1.9%), BRL (-1.1%) and COP (-1.0%) gained the most.
• Asian equity markets, the Nikkei, Hang Seng and the Shanghai Composite are down.

• Japan’s national CPI remained steady, at 2.8% y/y, in June.
• In m/m terms, this was the second consecutive acceleration in inflation.
• The CPI, now been above the BOJ’s target of 2% for 27 months, has put a rate hike on the table at the next BOJ meeting on 31 July.

• UK GfK consumer confidence came in at -13 in July, up only marginally from -14 in June.
• Consumers have not adjusted their rating of the economic outlook in 12 months’ time, with this sub-component remaining steady, at -11, in July.
• They have, however, scaled back their optimism on their personal finances outlook slightly, from 4 in June, to 3 in July.
• The rating of the climate for major purchases improved somewhat, from -23 in June, to -16 in July, but remains firmly in negative terrain.
• UK retail sales data are on the cards today.

• Locally, President Cyril Ramaphosa opened parliament with his State of the Nation Address (SoNA) in Cape Town last night.
• The president set out three key strategic priority areas on which the government of national unity (GNU) has agreed to focus: inclusive economic growth and job creation; reducing poverty; and building a capable and ethical state.
• Inclusive economic growth, with transformation and empowerment, is at the centre of the work of the GNU.
• Structural reforms will continue, and be broadened; Operation Vulindlela (OV) has been successful in breaking down silos in government to drive the implementation of reforms.
• OV Phase Two will target local government to improve service delivery, the release of public land for social housing, and harnessing digital public infrastructure, while completing implementation of reforms in the energy, logistics and water sectors as well as those relating to visas.
• Fixing struggling municipalities through institutional structures and a fit-for-purpose funding model for local government will be key.
• Funding for land reform will increase, and the transfer of state land will be prioritised, and post-settlement support strengthened.
• Infrastructure South Africa is to be positioned as the central institution for co-ordination and planning; the simplification of regulations relating to public-private partnerships will continue.
• Supporting small- and medium-sized enterprises and the informal sector “hold the greatest potential for inclusive growth and job creation”; the public sector has been directed to reduce red tape and the undue regulatory burden.
• The Presidential Employment Stimulus, Expanded Public Works Programme and other initiatives will be expanded and institutionalised.
• In terms of reducing poverty and inequality, items in the food basket exempted from value added tax will be broadened, and the fuel price mechanism reviewed to alleviate pressure on low-income households.
• Provision of title deeds for social housing will continue to be rolled out to address asset poverty; job creation was noted as the main remedy for income poverty but the SDR grant will be used as basis for income support to the unemployed.
• National Health Insurance implementation will continue; contestation is to be resolved in finding broad consensus on how to pull in both private and public sector resources to meet health needs.
• On building an ethical and capable state, President Ramaphosa noted that the professionalisation of the public service would continue, together with addressing the financial position and ownership model of SOEs.
• Law enforcement agencies will be supported to fight crime and corruption; tackling crimes such as illegal mining, cash-in-transit heists, gang violence and the construction mafia is a priority.
• Cabinet will be putting together a detailed Medium-Term Development Plan for the next five years, setting out interventions, clear goals, measurable outcomes and a road map to meet these three strategic objectives.
• The National Development Plan Vision 2030 will continue to be the defining blueprint.
• The strategic goals will be aligned with the budget to support implementation; this while managing public finances to stabilise debt.
• Concerning the durability of the GNU, President Ramaphosa remarked that there are many issues on which there is agreement and that government will seek to build consensus on issues where agreement is not the case.

• Brent crude is down this morning, and up by 9.9% year-to-date.
• The gold price is down this morning, and up by 17.5% year-to-date.

• Brent crude oil is currently at $84.64/bbl; ($85.11/bbl*).
• Gold is at $2423/oz ($2456/oz*).
• SA CDS 200bps*, Brazil 158bps* and Turkey 263bps*.
• Yields: US 10yr at 4.20%*, German bund at 2.43%*, SA 10-year generic at 10.85%*, SA’s R2030 at 9.60%*.

* Denotes yesterday’s close.

Key events and data:

• 08h00: UK retail sales (June)
• 10h00: Eurozone current account (May)

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