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Closing the loop 02 August 2022

Closing the loop

Shireen Darmalingam

Market highlights:

  • The rand is weaker at R16.60/$ (R16.46/$*) today; it ranged between R16.43/$ and R16.64/$.
  • The currency is above its 50-day, 100-day and 200-day moving averages (R16.24/$, R15.77/$ and R15.63/$).
  • EM currencies are mixed today; the RUB (+3.2%), INR (+0.4%) and CNY (0.2%) are the biggest gainers; the COP (-1.2%), MXN (-1.0%) and BRL (-0.9%) are the biggest losers.
  • US Job Openings and Labor Turnover Survey (JOLTS) job openings fell to 10.7 million in June, its lowest since September last year, from 11.3 million in May.
  • The data signals moderating demand for labour amid growing economic pressures.
  • US non-farm payrolls for July, due out on Friday, are expected to have increased by 250k from an increase of 372k in June.
  • The unemployment rate is expected to have remained steady at 3.6% in July.
  • UK house prices increased by 11% y/y in July after a 10.7% y/y increase in June.
  • The increase comes despite rising interest rates, surging inflation and lower affordability.
  • Demand continues to be supported by strong labour market conditions.
  • Turkey’s CPI for July, scheduled for release tomorrow, is expected to have increased to 80.2% y/y from June’s increase to 78.6% y/y.
  • Still, the central bank is unlikely to tighten policy as the political leadership calls for lower rates.
  • Brazil’s central bank meets tomorrow and is expected to hike the Selic rate by 50 bps to 13.75%.
  • The central bank is also expected to leave the door open for further rate hikes this year as inflation expectations remain unanchored.
  • Brazilian inflation has been volatile in recent months.
  • Tax cuts on some essential goods and services and two cuts in gasoline prices provided room for CPI to ease.
  • The strengthening of the BRL has also provided some relief.
  • However, large income transfers may drive prices up again while inflation expectations remain above target.
  • Locally, the industry-wide PMI is due out tomorrow; the PMI is expected at 50.5 in July, from 52.5 in June.
  • Eskom indicated that Stage 2 loadshedding could be implemented between 16h00 and midnight over the next three days due to a shortage of generation capacity.
  • The delay in returning generation units to service at 2 coal-fired power stations and the failure of units at 4 other plants have worsened capacity constraints.
  • The oil price is up by 0.3% today, and up by 29% in the year-to-date.   
  • The gold price is up by 0.6% today, and down by 2.5% in the year-to-date.
  • Brent crude oil is at $100.30/bbl ($100.03/bbl*).
  • Gold price is at $1783/oz ($1773/oz*). 
  • SA CDS is at 293bps (301bps*), Brazil 282bps (274bps*), Turkey 789bps (822bps*).
  • Yields: US 10yr at 2.57% (2.57%*), German bund at 0.75% (0.78%*) and SA 10-year generic at 10.77% (10.90%*), SA’s R186 is at 8.90% (9.04%*).
  • The JSE ALSI is down by 1.4% today (-0.4%*).

* Denotes yesterday’s close. 

Key events and data:

  • 02h30: Japan Jibun Bank services and composite PMI (July - final)
  • 03h45: China Caixin services and composite PMI (July – final)
  • 09h00: Turkey CPI, PPI (July)
  • 09h15: SA industry-wide PMI (July)
  • 10h00: Eurozone S&P Global services and composite PMI (July – final)
  • 10h30: UK S&P Global services and composite PMI (July – final)
  • 11h00: Eurozone PPI (June), retail sales (June)
  • 13h00: US MBA mortgage applications )29 July)
  • 15h45: S&P Global services and composite PMI (July – final)
  • 16h00: US durable goods, factory orders (June), ISM services (July)
  • 23h30: Brazil interest rate decision – 50 bps hike expected

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