In the loop 15 July 2024

In the loop

Christelle Grobler

What you should know this morning:

The rand is trading at R17.98/$ this morning, after closing stronger on Friday (R17.96/$*).
EM currencies were mixed on Friday; the COP (+1.4%), MXN (+1.1%) and PEN (+0.9%) gained the most; the TRY (-0.6%), KRW (-0.2%) and RUB (-0.2%) lost the most.
Asian equity markets are mixed this morning; the Nikkei and the Hang Seng are down, while the Shanghai Composite is up.

The People’s Bank of China (PBOC) kept its one-year medium-term lending facility rate unchanged at 2.50% this morning.
Earlier, Governor Pan Gongsheng had hinted policy deliberations as being dominated by exchange rate stability considerations.
Pan also noted that the focus might shift to using the 7-day reverse repo as key policy rate, which can be adjusted at shorter notice.
The PBOC has kept its one-year medium-term lending facility rate unchanged since August.

China’s Q2:24 GDP data came in weaker than expected; real GDP growth slowed to 4.7% y/y in Q2:24, down from 5.3% y/y in 1Q:24.
On a quarterly basis, growth decelerated to 0.7% q/q in Q2:24 from an expansion of 1.6% q/q in Q1:24.
Weak consumer demand and a prolonged slowdown in the real estate sector have been weighing on the world’s second-largest economy.
Residential property sales and property investment were down 26.9% y/y and 10.1% y/y respectively in the first half of the year.
New home prices dropped 4.5% y/y in June – the fastest pace of decline in nine years; prices were down 0.7% on a m/m basis in June.
China’s industrial production growth data has also been slowing.
Industrial production was 5.3% higher y/y in June, after rising 5.6% y/y and 6.7% y/y in May and April respectively.
Retail sales growth eased more than expected, to 2.0% y/y in June, down from 3.7% y/y in May.

The Chinese Communist party’s Central Committee is meeting to set the country’s economic policy direction; the last meeting was in 2018.
Investors will be keeping a close eye on outcomes of this quinquennial meeting to gauge the policy direction for the next five years.
Premier Li Qiang signalled, at a recent World Economic Forum event, that “no shock therapy” would be forthcoming.
Comparing the economy to a patient recovering from a serious illness, Li said that “according to Chinese medical theory, at this time, we cannot use strong medicine”.
The government’s full-year growth target is around 5%.

The ECB meets on Thursday and is also likely to keep its benchmark interest rate unchanged.
Various European policymakers have commented that incoming data would need to be closely monitored after the June rate cut and that the cutting cycle is by no means on “autopilot”.

Locally, the SARB will announce its interest rate decision on Thursday.
The MPC is expected to keep the repo rate steady at 8.25%.
Wednesday sees the release of retail trade sales data for May.
Retail sales volumes likely declined 0.9% m/m in May, after rising 0.5% m/m in April; sales volumes are expected to have increased 0.6% y/y in May.
President Cyril Ramaphosa is expected to deliver his State of the Nation Address (SoNA) on Thursday evening.

Brent crude oil is currently at $85.17/bbl; ($85.03/bbl*).
Gold is at $2413/oz ($2411/oz*).
SA CDS 195bps*, Brazil 147bps* and Turkey 256bps*.
Yields: US 10yr at 4.18%*, German bund at 2.50%*, SA 10-year generic at 10.71%*, SA’s R2030 at 9.47%*.

*Denotes Friday’s close.

Key events and data:

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