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In the loop 06 June 2024

In the loop

Shireen Darmalingam

What you should know this morning:

  • The rand is stronger this morning, at R18.90/$, after closing weaker yesterday (R18.96/$*).
  • EM currencies were mixed yesterday; the MXN (+1.9%), TRY (+1.0%) and HUF (+0.5%) were the biggest gainers; the ZAR (-1.4%), IDR (-0.4%) and THB (-0.3%) were the biggest losers.
  • Asian equity markets are mixed this morning; the Nikkei and Hang Seng are up, while the Shanghai Composite is down.
  • The US ISM services PMI overshot expectations in May, increasing to 53.8, from 49.4 in April.
  • New orders and business activity were the main drivers of the increase in May.
  • The employment sub-component improved modestly but remained in contraction in May.
  • The increase in the ISM services PMI was in line with the uptick in the S&P global services PMI, which increased to 54.8 in May, from 51.3 in April.
  • The US trade balance for April, due out today, is likely to have widened further, to a deficit of $76.5bn, from a deficit of $69.4bn in March.
  • The ECB policy meeting is in the spotlight today as the bank decides on rates; the central bank is largely expected to cut its benchmark interest rate by 25 bps today.
  • Several ECB policymakers have recently expressed the view that the central bank should not be in “autopilot” mode following the first rate cut.
  • Rather, the central bank should assess all data and decide on a meeting-by-meeting basis.
  • Investors will likely keep an eye on President Christine Lagarde’s press conference after the interest rate announcement for clues on the bank’s next steps.
  • The ECB is likely to keep its inflation forecasts unchanged from March; however, the GDP forecasts may be upwardly revised.
  • Eurozone retail sales for April are also due out today; sales are likely to have declined by 0.3% m/m in April, after having increased by 0.8% m/m in March.
  • On a y/y basis, sales are expected to have increased by 0.2% in April, following a 0.7% increase in March.
  • The UK Decision Maker Panel (DMP) survey for one-year ahead inflation expectations are expected to come in at 2.8% in May, from 2.9% in April.
  • The three-month inflation expectations are likely to come in at 3.9% in May, from 4.0% in April.
  • Locally, the current account for Q1:24 is scheduled for release today; the deficit is likely to have narrowed to 1.6% of GDP in Q1:24, from a deficit of 2.3% of GDP in Q4:23.
  • Electricity production and consumption releases for April are due out today.
  • Eskom: loadshedding remains suspended until further notice.
  • Brent crude is up this morning, and up by 2.3% year-to-date.
  • The gold price is up this morning, and up by 14.8% year-to-date.
  • Brent crude oil is currently at $78.79/bbl; ($78.41/bbl*).
  • Gold is at $2368/oz ($2352/oz*).
  • SA CDS 241bps*, Brazil 144bps* and Turkey 266bps*.
  • Yields: US 10yr at 4.27%*, German bund at 2.51%*, SA 10-year generic at 12.13%*, SA’s R2030 at 10.69%*.

* Denotes yesterday’s close.

Key events and data:

  • 10h30: UK Decision Maker Panel (DMP) 3m and 1yr inflation expectations (May)
  • 11h00: SA current account balance (Q1:24)
  • 11h00: Eurozone retail sales (April)
  • 13h00: SA electricity production and consumption (April)
  • 14h15: Eurozone ECB interest rate decision – 25 bps cut expected
  • 14h30: US trade balance (April), initial jobless claims (1 June)

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