In the loop 31 July 2024

In the loop

Shireen Darmalingam

What you should know this morning:

The rand is stronger this morning, at R18.30/$, after closing stronger yesterday (R18.35/$*).
EM currencies were mixed yesterday; the ZAR (+0.6%), RUB (+0.4%) and MYR (+0.3%) were the biggest gainers; the HUF (-0.6%), MXN (-0.5%) and COP (-0.5%) were the biggest losers.
Asian equity markets the Nikkei, Hang Seng and Shanghai Composite are up.

China’s manufacturing PMI slipped further in July, to 49.4, from 49.5 in June.
The data adds to evidence of weakness in an area on which China is relying to drive its economy.
The services PMI slipped to 50.2 in July, from 50.5 in June.
The composite PMI also came in lower, at 50.2 in July, from 50.5 in June.

The BOJ has hiked its benchmark interest rate to 0.25%, from 0.1%.
The BOJ noted that the decision came as prices have been developing broadly in line with forecasts.
However, the central bank highlighted that it would need to pay attention to upside risks to the inflation forecasts.
The bank also unveiled plans to reduce bond-buying.

Eurozone CPI data for July will likely show headline inflation staying unchanged and the core measure falling only slightly in July.
Headline inflation is expected to come in at 2.5% y/y in June, the same as in May.
On a m/m basis, CPI is likely to have declined by 0.1% in June, following a 0.2% increase in May.
Core CPI is expected to have moderated to 2.8% y/y in June, from 2.9% y/y in May.

The US Fed’s FOMC meeting is in the spotlight today.
While the Fed is expected to keep the Fed funds rate unchanged, it will likely signal a rate cut soon.
Investors will keep an eye Fed Chair Jerome Powell’s comments after the meeting; Powell may signal a readiness to cut as soon as September.
The US private sector ADP employment report, the precursor to the non-farm payrolls report, is also on the cards today.
Private payrolls are likely to have to have increased by 150k in July, matching June’s increase.

Locally, the June trade balance is due out today; a trade surplus of R22.3bn is expected, from R20.1bn in May.
There has been a notable improvement in the trade balance so far this year (with a surplus of R26.6bn from January to May 2024, vs R6.7bn in the comparable period last year).
This is significantly better than many investors’ earlier expectation for a rapid widening of the external balances.

Brent crude oil is currently at $79.82/bbl; ($78.63/bbl*).
Gold is at $2418/oz ($2399/oz*).
SA CDS 198bps*, Brazil 158bps* and Turkey 262bps*.
Yields: US 10yr at 4.13%*, German bund at 2.34%*, SA 10-year generic at 10.84%*, SA’s R2030 at 9.49%*.

* Denotes yesterday’s close.

Key events and data:

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