In the loop

What you should know this morning:

• The rand is stronger this morning, at R18.00/$, after closing stronger yesterday (R18.02/$*).
• EM currencies were mixed yesterday; the ZAR (+1.2%), RUB (+0.5%) and CLP (+0.4%) were the biggest gainers; the BRL (-0.8%), ARS (-0.6%) and MXN (-0.6%) were the biggest losers.
• Asian equity markets are mixed this morning; the Nikkei is up, while the Hang Seng and Shanghai Composite are down.

• Japan’s GDP for Q1:25 came in lower than expected, at -0.7% q/q (SA), following a revised 2.4% q/q (SA) increase in Q4:24.
• This contraction was driven by weaker trade and stalling consumer spending.
• Today’s data raises concerns about the economy’s resilience ahead of US tariffs.

• ECB Vice President Luid de Guindos yesterday commented that the recent trade turmoil could “upend the region’s financial system”.
• While the financial system is currently sound, the risks of tariffs, deregulation and reduced international cooperation pose a concern.
• There is also the potential for “tail events” in a highly uncertain and volatile environment.
• Guindos added that trade tensions, high funding costs and weak economic growth could pose headwinds for firms and households.

• EU trade officials have expressed optimism in reaching an agreement with the US to reduce the proposed tariff hikes.
• The US has already agreed on a deal with the UK and has de-escalated the trade conflict with China.
• The EU has warned of countermeasures if the trade deal is unsatisfactory.

• Fed Governor Michael Barr yesterday warned that tariffs could weigh the heaviest on small businesses, which often lack alternative sources for inputs and goods.
• Barr noted that “potential disruptions to supply chains and distribution networks are particularly acute for small businesses”.
• He added that these businesses are less diversified and less able to access credit, and are thus “more vulnerable to adverse shocks”.

• The US NAHB housing market index deteriorated in May to 34 (the lowest level since late 2023), from 40 in April.
• All three components that make up the index fell in May.
• The deterioration comes as tariffs are making it harder to price homes.
• US housing starts and building permits for April are due out today.
• Housing starts have proved especially volatile in recent months.
• Housing starts are likely to have increased in April, while building permits are expected to have slipped.
• The University of Michigan sentiment index for May is also due out today.
• The sentiment index is likely to have improved to 53.3 in May, from 52.2 in April.

• Locally, Deputy Finance Minister David Masondo yesterday noted an announcement on SA’s inflation targeting regime as imminent.
• The SARB and National Treasury are working to establish an appropriate inflation framework, with an announcement expected "very soon".
• The rand gained on expectations that a lower inflation target would keep monetary policy tighter for longer.
• It’s a quiet day as far as data releases are concerned.

• Brent crude is up this morning, and down by 13.2% year-to-date.
• The gold price is down this morning, and up by 22.5% year-to-date.

• Brent crude oil is currently at $64.75/bbl; ($64.53/bbl*).
• Gold is at $3214/oz ($3222/oz*).
• SA CDS 209bps*, Brazil 165bps* and Turkey 303bps*.
• Yields: US 10yr at 4.42%*, German bund at 2.62%*, SA 10-year generic at 10.47%*, SA’s R2035 at 10.43%*.

* Denotes yesterday’s close.

Key events and data: 

• 11h00: Eurozone trade balance (March)
• 14h30: US housing starts, building permits (April)
• 16h00: US University of Michigan sentiment, 1 yr and 5-10 yr inflation expectations (May)

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