In the loop 01 February 2024

In the loop

Shireen Darmalingam

What you should know this morning:

The rand is weaker this morning, at R18.68/$, after closing stronger yesterday (R18.66/$*).
EM currencies were mixed yesterday; the ZAR (+0.8%), HUF (+0.8%) and PLN (+0.5%) were the biggest gainers; the TWD (-0.5%), KRW (-0.4%) and THB (-0.3%) were the biggest losers.
Asian equity markets are mixed this morning; the Nikkei is down, while the Hang Seng and Shanghai Composite are up.

China’s Caixin manufacturing PMI remained unchanged, at 50.8, in January, with both supply and demand increasing.
However, employment remained in contraction, while price levels were subdued.
This data contrasts with the official manufacturing PMI data which contracted in January.

The US FOMC held the Fed funds rate steady yesterday, for a 4th consecutive meeting, as expected.
The Fed signalled its openness to a cutting cycle; the central bank, in its policy statement, has removed the previous assertion that a rate hike was possible.
The FOMC noted that it “judges that the risks to achieving its employment and inflation goals are moving into better balance”.
The Fed added that it would continue to “carefully assess incoming data, the evolving outlook, and the balance of risks”.
Fed Chair Jerome Powell commented that policymakers would move patiently when starting rate cuts.
He also indicated that it’s unlikely that rate cuts would start at the next meeting.

The BOE’s MPC decision is in the spotlight today; the bank is largely expected to keep its benchmark interest rate steady, at 5.25%.
Inflation has moderated significantly over the past few months, supporting the case for the central bank to consider cutting interest rates later this year.
Investors will keep an eye on the changes to the bank’s growth and inflation forecasts.
The BOE’s Decision Maker Panel survey for January, due out today, will provide an update on price and wage inflation expectations.
The data will be closely monitored to assess the risks around inflation persisting.
The Swedish Riksbank too will be meeting today and is likely to keep interest rates unchanged, at 4.0%; hawkish guidance, however, is expected.

The Eurozone CPI for January is expected to have eased, to 2.7% y/y, from 2.9% y/y in December.
A decline in road fuel costs is likely to have been one of the main drivers of the moderation in headline inflation.
However, increases in gas and electricity bills are likely to pose upside risks.
Core CPI for the region is also likely to have moderated in January, to 3.2% y/y, from 3.4% y/y in December.

Locally, the BER manufacturing PMI for January is due for release today; the index likely slipped to 50.0, from 50.9 in December.
The January Naamsa vehicle sales are expected to have fallen by 5.2% y/y, after having fallen by 3.3% y/y in December.
Electricity production and consumption releases for December are also on the cards today.
Eskom: Stage 3 loadshedding is currently in place until further notice.

Brent crude oil is currently at $80.82/bbl; ($81.71/bbl*).
Gold is at $2045/oz ($2049/oz*).
SA CDS 229bps*, Brazil 137bps* and Turkey 331bps*.
Yields: US 10yr at 3.91%*, German bund at 2.16%* and SA 10-year generic at 11.11%*, SA’s R2030 at 9.74%*.

* Denotes yesterday’s close.

Key events and data:

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