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Closing the loop 07 December 2021

Closing the loop

Shireen Darmalingam

Market highlights:

  • The rand is weaker, at R15.96/$ (R15.92/$*) today; it ranged between R15.84/$ and R16.03/$.
  • The currency is above its 50-day, 100-day and 200-day moving averages (R15.29/$, R14.97/$ and R14.66/$ respectively).
  • EM currencies were mixed today; the CLP (+1.1%), TRY (+1.0%) and COP (+0.7%) were amongst the biggest gainers; the CZK (-0.5%), RON (-0.4%) and HUF (-0.4%) were amongst the biggest losers.
  • Eurozone GDP growth for Q3:21 came in at 2.2% q/q, as expected, from 2.1% q/q in Q2:21.
  • Private consumption expenditure was the biggest driver of growth in Q3:21 which increased as the region re-opened following lockdowns.
  • The German ZEW survey for December slipped to 29.9 pts in December from 31.7 pts in November.
  • The slippage of the expectations index suggests that hopes of stronger growth in 2022 are fading.
  • The current expectations index declined sharply to -7.4 pts in December from 12.5 pts in November.
  • The deterioration in confidence comes on the back of the new wave with infections rising to record levels.
  • The government has implemented restrictions to curb the spread which will likely further weigh on sentiment.
  • Locally, Q3:21 GDP contracted by 1.5% q/q from an upwardly revised increase of 1.1% q/q in Q2:21.
  • Lower growth came on the back of the riots in Q3:21, stricter lockdown measures as well as the cyberattack at the state-owned port and rail operator which impacted output.
  • Agriculture and trade had the biggest contractions in Q2:21.
  • The riots impacted these sectors in Gauteng and KwaZulu-Natal the most, the biggest provinces by contribution to GDP. 
  • Household consumption expenditure, which accounts for close to two-thirds of GDP, contracted by 1.6% q/q in Q3:21 from an increase of 0.6% q/q in Q2:21.
  • Consumer confidence, while still negative, improved in Q3:21 on the back of the re-instatement of welfare measures.
  • This could support household finances and spending in Q4:21.
  • On a y/y basis, GDP was up by 2.9% in Q3:21 from 19.3% in Q2:21.
  • The Omicron variant could disrupt the economic recovery.
  • The SARB’s gross reserves increased in November to $57.62bn from $57.52bn in October.
  • Net reserves slipped in November to $55.16bn from $55.43bn in October.
  • The SACCI business confidence for November and October’s retail sales data are due for release tomorrow.
  • Retail sales growth of 1.9% y/y is expected in October from 2.1% y/y in September. 
  • The oil price is up by 2.1% today, and up by 44.1% in the year-to-date.
  • The gold price is down by 0.1% today, and down by 6.3% in the year-to-date.
  • Brent crude oil is at $74.63/bbl; ($73.08/bbl*).
  • Gold price is at $1779/oz ($1780/oz*).
  • SA CDS is at 225bps (229bps), lower than Brazil 234bps (236bps*) and Turkey 517bps (538bps*).
  • Yields: US 10yr at 1.43% (1.43%*), German bund at -0.381% (-0.388%*) and SA 10-year generic at 9.85% (9.90%*), SA’s R186 is at 7.83% (7.88%*).
  • The JSE ALSI is up by 2.3% today (+0.3%*).

* Denotes yesterday’s close. 

Key events and data:

  • 01h50: Japan GDP (Q3:21), current account and trade balances (October)
  • 11h30: SA SACCI business confidence (November)
  • 13h00: SA retail sales (October)
  • 14h00: US MBA mortgage applications (3 December)
  • 17h00: US JOLTS job openings (October)

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