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In the loop 21 October 2024

In the loop

Christelle Grobler

What you should know this morning:

  • The rand is trading at R17.62/$ this morning, after closing stronger on Friday (R17.61/$*).
  • EM currencies were mixed on Friday; the RUB (+2.3%), PLN (+0.7%), PLP (+0.5%) and ZAR (+0.5%) gained the most; the CLP (-0.8%), BRL (-0.7%) and COP (-0.4%) lost the most.
  • Asian equity markets are mixed this morning; the Nikkei and Hang Seng are down, while the Shanghai Composite is up.
 
  • The Chinese banks lowered key lending rates by 25 bps earlier today; markets were pricing in cuts of 20 bps.
  • The move was aligned to the People’s Bank of China’s (PBOC) 20-25 bps range of interest rate cuts signalled earlier as part of a stimulus package to boost the housing market and revive economic growth.
  • The one-year loan prime rate (LPR) was lowered to 3.10%, from 3.35%, while the five-year LPR was reduced to 3.60%, from 3.85%.
  • Most loans in China are based on the one-year LPR – but the five-year rate determines the pricing of mortgages and other long-term loans.
  • The PBOC has signalled further monetary policy easing as in the pipeline; investors will also be on the lookout for broader stimulus measures to aid the Chinese economy.
  • China’s top legislature, the National People's Congress, will be meeting in the coming weeks; lawmakers are expected to consider a fiscal stimulus plan.
 
  • Atlanta Fed President Raphael Bostic has noted that he is in no a rush to lower the US policy rate to a neutral level.
  • “We must get inflation back to our 2% target, and I don’t want us to get to a place where inflation stalls out because we haven’t been restrictive for long enough. So I’m going to be patient”, Bostic said on Friday.
  • Bostic argued that it made sense to have started the easing cycle with a bigger move, after having held rates at restrictive levels for more than a year.
  • He expects slower US economic growth but that the labour market may remain robust.
  • Fed officials will meet on 6-7 November, right after the US presidential election.
 
  • The leading index for the US for September is due for release today.
  • The index likely contracted by 0.3% m/m in September, after contracting by 0.2% m/m in August.
  • This week will see the release of PMI data for October for major economies.
  • The annual meetings of the IMF and World Bank kick off in Washington today.
 
  • Locally, the focus will be on the release of CPI data for September on Wednesday.
  • Headline CPI inflation has likely decelerated further, from 4.4% y/y in August, to around 3.8% y/y in September.
  • In m/m terms, CPI likely rose 0.1% in September, matching August’s increase.
  • Core inflation is expected to have remained around 4.1% y/y in September.
 
  • Brent crude is up this morning, and down by 4.7% year-to-date.
  • The gold price is up this morning, and up by 32.2% year-to-date.
 
  • Brent crude oil is currently at $73.46/bbl; ($73.06/bbl*).
  • Gold is at $2728/oz ($2721/oz*).
  • SA CDS 182bps*, Brazil 153bps* and Turkey 268bps*.
  • Yields: US 10yr at 4.08%*, German bund at 2.18%*, SA 10-year generic at 10.53%*, SA’s R2035 at 10.59%*.
 

* Denotes Friday’s close.

Key events and data:

  • 16h00: US leading index (September)
 

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