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In the loop 09 January 2025

In the loop

Christelle Grobler

What you should know this morning:

  • The rand is trading at R18.93/$ this morning, after closing weaker yesterday (R18.92/$*).
  • EM currencies were mixed yesterday; the ZAR (-1.2%), PLN (-0.9%) and BGN (-0.6%) lost the most; the RUB (+2.6%), COP (+0.3%) and CLP (+0.3%) gained the most.
  • Asian equity markets, the Nikkei, Hang Seng and Shanghai Composite are down this morning.
 
  • China’s CPI barely increased in December; CPI was up only 0.1% y/y, down from 0.2% in November.
  • This is the fourth straight month of lower consumer inflation, thereby stoking fears of deflation returning.
  • Core CPI inflation, which excludes volatile food and fuel prices, rose for a third month, to 0.4% y/y – the highest since July.
  • The increase in core inflation likely points to some impact from the stimulus measures implemented last year to boost domestic demand.
  • Factory gate prices continued to fall, but at a slower pace.
  • The PPI recorded a decline of 2.3% y/y in December, after falling 2.5% y/y in November.
 
  • The minutes of the December FOMC meeting confirmed that the decision to cut rates by 25 bps was “finely balanced”.
  • Officials were focused on risks to the outlook, after data showed upside surprises on inflation and a solid growth performance.
  • Assumptions about the possible implications of any trade policy changes under incoming President Trump were incorporated by some policymakers.
  • The committee clearly views uncertainty as having increased and plans to navigate this with a cautious approach to future policy moves.
 
  • ECB Governing Council member Francois Villeroy de Galhau advocated for further rate cuts until the neutral rate is reached.
  • This is, however, premised on the inflation retreat matching forecasts.
  • The ECB will be meeting in a few weeks and is expected to cut the benchmark rate by 25 bps.
  • Despite inflation accelerating for a third month in December, officials are confident that their target, to reach inflation of 2% sustainably, will be achieved by the end of this year.
  • “The slight rise in December was expected, and does not call into question the ongoing victory over inflation”, Villeroy said.
  • The ECB will publish its Economic Bulletin later this morning.
 
  • Locally, manufacturing production data for November is due today.
  • During October, manufacturing production increased 0.4% m/m, resulting in a 0.8% y/y increase.
  • Manufacturing PMI data implies softer production data for November and December.
 
  • Brent crude is down this morning, and up by 1.9% year-to-date.
  • The gold price is up this morning, and up by 1.3% year-to-date.
 
  • Brent crude oil is currently at $76.02/bbl; ($76.16/bbl*).
  • Gold is at $2659/oz ($2656/oz*).
  • SA CDS 197bps*, Brazil 193bps* and Turkey 268bps*.
  • Yields: US 10yr at 4.69%*, German bund at 2.55%*, SA 10-year generic at 10.39%*, SA’s R2035 at 10.42%*.
 

* Denotes yesterday’s close.

Key events and data:

  • 12h00: Eurozone retail sales (November)
  • 13h00: SA manufacturing production (November)
 

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