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Closing the loop 14 January 2022

Closing the loop

Shireen Darmalingam

Market highlights:

  • The rand is stronger, at R15.34/$ (R15.39$*) today; it ranged between R15.26/$ and R15.44/$.
  • The currency is below its 50-day moving average (R15.74/$) and above its 100-day and 200-day moving averages (R15.26/$ and R14.78/$ respectively).
  • EM currencies were mixed today; the CLP (+0.6%), PEN (+0.4%) and TRY (+0.4%) were amongst the biggest gainers; the HUF (-0.8%), COP (-0.4%) and INR (-0.3%) were amongst the biggest losers.
  • Covid cases in Germany are surging as the Omicron variant spreads.
  • Hong Kong is expected to extend its ban on flights from the US, UK, Australia, Canada, France, India, Pakistan and the Philippines to 4 February.
  • The November UK GDP overshot expectations as growth surpassed its pre-pandemic size for the first time.
  • GDP increased by 0.9% m/m in November from 0.2% m/m in October.
  • Growth was broad-based with services, construction and manufacturing expanding more than expected.
  • However, lower growth and possibly contractions may be on the cards for December and January as the Omicron variant may have resulted in a cautious consumer.
  • It’s likely, however, that Q4:21 will surpass its pre-pandemic level too.
  • US retail sales fell sharply in December by 1.9% y/y from November’s 0.2% m/m increase.
  • The data suggests that higher inflation is taking a toll on consumers as the US grapples with rising Covid infections.
  • Locally, the NICD noted today that the death rate of those infected with Omicron in SA peaked at 14%-15% of the rate seen during the Delta wave.
  • The Omicron variant accounts for at least 98% of cases in the country, with a sustained drop in cases over the past two weeks.
  • The NICD noted that 580,000 people tested positive in the Omicron wave compared to 1.2 million people in the Delta wave.
  • There have also been fewer hospitalisations in the Omicron wave.
  • We look to the December CPI data out next week, which is expected to have increased to 5.7% y/y from 5.5% in November.
  • CPI is expected to have averaged 4.6% in 2021.
  • The November retail sales will also provide evidence of the health of the SA consumer; sales are expected to have increased by 1.9% y/y in November from 1.8% y/y in October.
  • Mining production for November is expected to have increased by 2.8% y/y from an increase of 2.1% y/y in October.
  • The oil price is up by 0.8% today, and up by 9.7% in the year-to-date.
  • The gold price is largely unchanged today, and down by 0.4% in the year-to-date.
  • Brent crude oil is at $85.32/bbl ($84.47/bbl*).
  • Gold price is at $1820/oz ($1820/oz*).
  • SA CDS is at 205bps (199bps*), Brazil 225bps (212bps*) and Turkey 556bps (543bps*).
  • Yields: US 10yr at 1.70% (1.70%*), German bund at -0.086% (-0.090%*) and SA 10-year generic at 9.79% (9.84%*), SA’s R186 is at 7.74% (7.78%*).
  • The JSE ALSI is down by 1.2% today (+0.1%*).

* Denotes yesterday’s close. 

Key events and data tomorrow:

  • On Monday: 01h50: Japan core machine orders (November)
  • 04h00: China industrial production (December), retail sales (December), GDP (Q4:21)

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