In the loop 22 July 2024

In the loop

Christelle Grobler

What you should know this morning:

The rand is trading at R18.27/$ this morning, after closing weaker on Friday (R18.27/$*).
EM currencies were mixed yesterday on Friday; the BRL (-1.0%), THB (-0.9%) and MXN (-0.8%) lost the most; the RUB (+0.2%), COP (+0.2%) and COP (+0.1%) gained the most.
Asian equity markets are mixed this morning, the Nikkei and the Shanghai Composite are down, while the Hang Seng is up.

The People’s Bank of China (PBOC) cut a key short-term policy rate earlier this morning.
The 7-day reverse repo rate was lowered by 10 bps, to 1.7%; the PBOC will be transitioning to this new policy benchmark rate.
In response, Chinese banks have lowered their loan prime rates by 10 bps.
China is struggling with a decline in the national price level, seeing the longest streak of deflation since 1999.
Growth slowed to the weakest pace in more than a year in Q2:24, according to data released last week, with consumer spending under pressure.
The Chinese Communist party’s Central Committee’s quinquennial meeting signalled few changes to the country’s economic policy direction.
China, the world’s second-large economy will continue to focus on manufacturing and technology, and has a full-year growth target of around 5%.

This week sees a slew of flash PMI data for July from major economies.
The Jibun Bank Japanese July PMI is due on Wednesday; the manufacturing PMI has been hovering around 50 in recent months.
The HCOB Eurozone PMI for July will be published on Thursday; the services component is expected to improve further, while the manufacturing PMI likely remained below 50 (signalling contraction).
Both the UK and US’s S&P Global PMIs, also out on Thursday, will likely register further expansion in both the manufacturing and services sectors.

New York Fed President John Williams said last week that, while recent inflation readings have been encouraging, he wants to see more data to be confident that inflation is heading to the 2% target.
He said that officials would “learn a lot between July and September”; the Fed is widely expected to begin reducing borrowing costs at the September meeting.
Williams noted that his estimates of the neutral level of interest rates for the US, Canada and the Eurozone have not changed much.
Fed policymakers’ June projections showed a rise in the neutral rate, to around 2.8%, from 2.5% before the pandemic, according to their median estimate.
However, Williams argues that the “underlying trends that supported low rates pre-pandemic are still very much intact”.
Williams is one of the last Fed officials to speak before they go into a closed period ahead of the 30-31 July meeting.

Locally, the SARB will release its business cycle indicators tomorrow.
The leading indicator for May will be closely watched; the leading indicator improved 2.4% m/m and 1.8% y/y, to 113 in April.
Wednesday sees the release of the CPI for June.
CPI inflation likely decelerated to 5.1% y/y in June, from 5.2% y/y in May, on the back of lower fuel prices.
The rental inflation category, surveyed in June, will provide an important gauge of demand-pull inflation.

Brent crude oil is currently at $83.06/bbl; ($82.63/bbl*).
Gold is at $2405/oz ($2401/oz*).
SA CDS 201bps*, Brazil 158bps* and Turkey 265bps*.
Yields: US 10yr at 4.24%*, German bund at 2.47%*, SA 10-year generic at 10.92%*, SA’s R2030 at 9.64%*.

* Denotes Friday’s close.

Key events and data:

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