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Closing the loop 19 January 2022

Closing the loop

Shireen Darmalingam

Market highlights:

  • The rand is stronger, at R15.34/$ (R15.52/$*) today; it ranged between R15.30/$ and R15.57/$.
  • The currency is below its 50-day moving average (R15.76/$) and above its 100-day and 200-day moving averages (R15.28/$ and R14.80/$ respectively).
  • EM currencies were mixed today; the ZAR (+1.2%), BRL (+0.9%) and RUB (0.8%) were amongst the biggest gainers; the MYR (-0.3%), IDR (-0.2%) and KRW (-0.1%) were amongst the biggest losers.
  • UK CPI surprised on the upside in December to its highest since 1992 coming in at 5.4% y/y from 5.1% y/y in November.
  • The increase was driven by higher costs of food, beverages, restaurant meals and furniture.
  • On a m/m basis, CPI was up by 0.5% in December from 0.7% in November. 
  • Households spending power has been adversely impacted by rising prices of goods and services, which has increased faster than wages.
  • Higher inflation is strengthening the case for a rapid tightening of rates by the BOE.
  • The BOE meets early next month and is expected to hike rates.
  • US housing starts overshot expectations in December increasing by 1.4% m/m following an 8.1 % m/m increase in November.
  • The increase was driven by apartment projects and signals that builders navigated supply chain disruptions and labour shortages.
  • Supply chain challenges, high commodity prices and a lack of skilled workers, however, will continue to challenge the housing market.
  • Building permits also surprised on the upside in December.
  • Locally, CPI increased more than expected to 5.9% y/y in December from 5.5% y/y in November.
  • On a m/m basis, CPI came in at 0.6% in December from 0.5% in November.
  • Core CPI increased to 3.4% y/y in December from 3.3% y/y in November.
  • Headline inflation was driven mainly by rising fuel and food prices in December.
  • We expect the SARB to hike the repo rate by 25 bps when it meets next week.
  • Retail sales overshot expectations and increased by 3.3% y/y in November, from 1.9% y/y in October.
  • Positive y/y growth rates were recorded for retailers of pharmaceuticals and medical goods, cosmetics and toiletries and textiles, clothing, footwear and leather goods, general dealers and household furniture.
  • On a m/m basis, sales increased by 1.9% in November following a decline of 1.3% in October.   
  • The oil price is up by 0.8% today, and up by 13.4% in the year-to-date.
  • The gold price is up by 0.7% today, and down by 0.2% in the year-to-date.
  • Brent crude oil is at $88.19/bbl ($87.51/bbl*).
  • Gold price is at $1825/oz ($1812/oz*).
  • SA CDS is at 206bps (215bps*), Brazil 224bps (227bps*) and Turkey 541bps (556bps*).
  • Yields: US 10yr at 1.86% (1.87%*), German bund at -0.010% (-0.018%*) and SA 10-year generic at 9.83% (9.85%*), SA’s R186 is at 7.80% (7.82%*).
  • The JSE ALSI is up by 1.3% today (-0.8%*).

* Denotes yesterday’s close. 

Key events and data tomorrow:

  • 01h50: Japan trade balance (December)
  • 12h00: Eurozone CPI (December)
  • 14h30 Eurozone ECB meeting minutes (December)
  • 15h30: US initial jobless claims (15 January)
  • 17h00: US existing home sales (December)

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