In the loop

What you should know this morning:

• The rand is stronger this morning, at R16.52/$, after closing weaker yesterday (R16.54/$*).
• EM currencies were mixed yesterday; the RUB (+1.6%), MXN (+1.0%) and INR (+1.0%) were the biggest gainers; the HUF (-0.4%), CZK (-0.3%) and PLN (-0.3%) were the biggest losers.
• Asian equity markets the Nikkei, Hang Seng and Shanghai Composite are down.

• Iran war: Iran has indicated that it was reviewing Washington's latest response to its Hormuz proposal and would provide a further reply once that assessment was complete.
• Significant differences remain, with the US maintaining its blockade and sanctions, while Iran insists its conditions be met before reopening the Strait.

• The IMF today upgraded its global growth outlook to 3.1% in 2026, from its previous estimate of 3.0%.
• This reflects stronger-than-expected activity, particularly from continued AI-related investment, technological spending, and the ability of businesses and households to adapt to supply disruptions.
• However, the Fund left its 2027 global growth forecast unchanged, at 3.4%.
• It noted that, while growth should strengthen next year, a recovery is expected to be moderate rather than accelerate sharply.
• The IMF left its US growth forecast for 2026 unchanged, at 2.3%, and lifted it to 2.3% in 2027 (from 2.2% previously).
• It lifted its Eurozone growth forecast to 1.1% in 2026 (from 0.9% previously) and kept it unchanged at 1.2% in 2027.
• Sub-Saharan Africa growth forecast was increased to 4.5% in 2026 (from 4.3% previously); it left the 2027 forecast unchanged, at 4.5%.
• South Africa's growth outlook was lowered to 1.0% in 2026 (1.1% previously) and unchanged at 1.3% in 2027.
• The IMF warned that the global economy is becoming increasingly vulnerable as the buffers that have helped absorb recent shocks are being depleted.
• Higher energy costs, rising public debt levels, narrowing fiscal space and persistent geopolitical risks continue to cloud the outlook.
• The Fund forecasts global headline inflation to rise to 4.7% in 2026, then moderating only gradually to 4.1% in 2027.
• The IMF believes that the recent energy shock is continuing to feed through to production costs, transport prices, and inflation, while resilient economic activity has limited the pace of disinflation.

• ECB Governing Council member Christodoulos Patsalides yesterday said that, while higher interest rates can help contain inflation, they cannot prevent new economic or geopolitical shocks.
• He argued that the ECB's role is to limit the inflationary consequences of events, such as energy market disruptions, rather than eliminate their underlying causes.
• Patsalides stressed that policymakers must remain vigilant to supply-side risks, particularly from energy markets, while keeping inflation expectations anchored and inflation on track to return to the ECB's 2% target.
• His remarks suggest support for a cautious, data-dependent policy approach in an environment where geopolitical developments continue to pose significant risks to the inflation outlook.

• ECB Governing Council member Yannis Stournaras signalled that further interest rate increases might be necessary to bring inflation under control.
• Stournaras suggested that the ECB's gradual approach of raising rates once per quarter has helped to contain inflationary pressures, while limiting adverse spillover effects.
• He emphasised that inflation remains relatively high and that the ECB's priority is to keep inflation expectations anchored until headline inflation has subsided.

• BOE policymaker Catherine Mann yesterday warned that upcoming wage negotiations might fuel further inflationary pressures in the UK amid the ongoing energy shock. 
• Mann cautioned that workers and employers are negotiating 2027 pay settlements at a time when inflation is projected to reach 4%.
• This is double the BOE's 2% target and raises the risk of a wage-price spiral. 
• Beyond the Iran-related energy shock, Mann highlighted additional inflationary pressures from AI-related imports and rising food prices. 
• These pressures are only partially offset by cheaper Chinese goods being redirected to the UK from the US market.

• The US NFIB small business optimism index for September, scheduled for release today, likely slipped to 98.2, from 98.7 in August.
• Existing home sales, also due out today, are expected to have fallen in September.
• Pending home sales increased negligibly in August after declining for two consecutive months; recent data has pointed to further weakness. 

• Locally, mining production for August is due out today; production declined by 7.5% y/y in July and by 1.9% m/m.

• Brent crude is down this morning, and up by 73.3% year-to-date.
• The gold price is up this morning, and down by 2.9% year-to-date.

• Brent crude oil is currently at $105.35/bbl; ($106.65/bbl*).
• Gold is at $4195/oz ($4172/oz*).
• SA CDS 134bps*, Brazil 108bps* and Turkey 242bps*.
• Yields: US 10yr at 5.19%*, German bund at 3.47%*, SA 10-year generic at 9.00%*, SA's R2035 at 8.79%*.

* Denotes yesterday's close. 

Key events and data:

• 11h30: SA mining production (August)
• 12h00: US NFIB small business optimism (September)
• 14h15: US ADP weekly employment changes (26 September)
• 16h00: US existing homes sales (September)

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