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.

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:

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