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Closing the loop 13 October 2021

Closing the loop

Shireen Darmalingam

Market highlights:

  • The rand is stronger at R14.83/$ (R14.95/$*) today; it traded in a range of R14.81/$ to R14.98/$.
  • It is above its 50-day, 100-day and 200-day moving averages (R14.74/$, R14.47/$ and R14.58/$, respectively).
  • EM currencies were mixed today; the PEN (+1.3%), ZAR (+0.9%) and CZK (+0.5%) were amongst the biggest gainers; the TRY (-0.5%), COP (-0.1%) and BRL (-0.1%) were amongst the biggest losers.
  • UK GDP fell short of expectations in the 3 months to August coming in at 2.9% from an upwardly revised 4.2% in the 3 months to July.
  • The disappointing growth comes as shoppers reined in spending in August.
  • The economic recovery is also being impacted by supply shortages and accelerating inflation.
  • The data casts doubt on whether the economy will return to pre-pandemic GDP levels this year.
  • It may also give the BOE room to delay an increase in rates this year.
  • US CPI overshot expectations in September increasing by 5.4% y/y from 5.3% y/y in August.
  • The increase was driven by higher food and house prices; prices of used cars and trucks, apparel and airfares moderated.
  • Shipping challenges, materials shortages, high commodities prices and rising wages have increased producers’ costs who have passed on costs to consumers. 
  • This has led to persistently higher inflation above previous estimates.
  • The data underscores the persistence of inflationary pressures in the economy.
  • The market’s attention will now be focused on the US FOMC meeting minutes later this evening.
  • Locally, retail sales undershot expectations and contracted by 1.3% y/y in August following a downwardly revised decline to 1.2% y/y in July.
  • Negative y/y growth rates were recorded for retailers in household furniture, appliances and equipment, hardware, paint and glass, all “other” retailers and general dealers .
  • The main negative contributor to the decrease emanated from general dealers.
  • On a m/m basis, sales were also short of expectations coming in at 4.9% y/y from a contraction of 11.1% in July.
  • The oil price is down by 0.7% today and up by 59.9% in the year-to-date.
  • The gold price is up by 1.7% today and down by 5.6% in the year-to-date.
  • Brent crude oil is at $82.85/bbl; ($83.42/bbl*).
  • Gold price is at $1791/oz ($1760/oz*).
  • SA CDS is at 218bps (220bps*), higher than Brazil 209bps (209bps*) and lower than Turkey 441bps (443bps*).
  • Yields: US 10yr at 1.56% (1.57%*), German bund at -0.127% (-0.0.86%*) and SA 10-year generic at 9.84% (9.96%*), SA’s R186 is at 7.81% (7.90%*).
  • The JSE ALSI is down by 0.4% today (-0.2%*).

* Denotes yesterday’s close. 

Key events and data:

  • 01h50: Japan industrial production, capacity utilisation (August)
  • 03h30: China CPI, PPI (September)
  • 14h30: US initial jobless claims (9 October), PPI (September)

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