Freedom at last

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Freedom at last

GM Daily: Freedom at last

Global: Going postal

SA: Moving to alert level 2

Rand: Remaining in the 17.00-17.50 range

Local rates: Strong ILB auction

What to watch this week

Monday

JN GDP SA
JN Capacity Utilisation
EC Construction Output
US Empire Manufacturing
US NAHB Housing Market Index
US MBA Mortgage foreclosures

Tuesday

US Housing Starts

Wednesday

JN Trade Balance
UK CPI
UK Retail Price Index
UK PPI Output NSA
EC ECB Current Account SA
UK House Price Index
EC CPI
US MBA Mortgage Application
US FOMC Meeting Minutes

Thursday

CH 1-Year Loan Prime Rate
GE PPI
US Initial Jobless Claims
US Continuing Claims
US Bloomberg Economic Expectations
US Bloomberg Consumer Comfort
US Leading Index

Friday

UK GFK Consumer Confidence
JN Natl CPI
UK Public Finances
SA Bloomberg August SA Economic Survey
GE Markit/BME Germany Manufacturing PMI
EC Markit Eurozone Manufacturing PMI
UK Markit PMI Manufacturing
US Markit US Services PMI
US Markit US Composite PMI
EC Consumer Confidence
US Existing Home Sales

Covid-19 update

Source: WHO, NICD

Economics and markets

A review of phase 1 of the trade deal between the US and China was delayed, but President Trump has otherwise not let up on emphasising his tough stance on China, and has officially told ByteDance, TikTok’s owner, to sell all US assets.
Use of postal ballots in the US November elections is increasingly a campaign issue.
The rand seems to remain bound between 17.00 and 17.50 against the US dollar.
SA moves to alert level 2, but the economic boost will remain limited. The President has hinted at an economic recovery plan to be unveiled in the near future.
USD/ZAR opens at 17.38; EUR/ZAR at 20.58; GBP/ZAR at 22.75 and CNY/ZAR at 2.50.

Politicking is the name of the game on many fronts in the US as the 3 November elections draw ever nearer. While a review of phase 1 of the trade deal between the US and China was delayed, apparently due to scheduling difficulties, President Trump has otherwise not let up on emphasising his tough stance on China, and has officially told ByteDance, TikTok’s owner, to sell all US assets. He has hinted that ByteDance is not the only China-based company that the US has set its sights on. Closer to home soil, there still seems to be no new fiscal stimulus package on the horizon. Right now a big loser in this respect is the US Postal Service (USPS), which is seeing a shrinking budget in precisely the year in which the postal ballot is becoming a preference for many Americans as covid-19 remains a near and present danger. President Trump has expressed strong reservations against a postal ballot for a number of reasons, however it seems to remain an important option for those who are worried about standing in crowded queues and in general seems to have become a campaign issue.

With a lack of new news (and I feel I can say this with confidence, having taken a week off recently), markets have started the week on a mixed footing. The Hang Seng and Shanghai Indices have moved stronger in the morning’s trading session, while the Nikkei and ASX are weaker. Direction for the week’s trade will come from any progression on the resolution of geopolitical tensions, or the escalation thereof, as well as any surprises coming out of data releases, although there are not a lot of releases that will give guidance on global real economic activity. The FOMC minutes will be closely scoured, however it is unlikely they will produce any significant surprises.

Thus SA, with a very thin data week, will see asset markets following the global trend. The rand seems to remain bound between 17.00 and 17.50 against the US dollar, and there is unlikely to be anything that will push it significantly out of this range. Of course the good news from the President on Saturday night, moving SA to alert level 2 – and thus giving us the freedom (after almost five months) to see family and friends, travel across provincial borders for all purposes (including leisure), go to gym, buy alcohol and cigarettes – could boost sales and bookings this week as people start restocking and planning their escape from home! However, the boost will be limited as the domestic economy is unlikely to move back to pre-covid levels and employment remains weak. It will also be important for citizens to maintain social distancing and hygiene practises as we interact more, to ensure we do not experience a steep increase in new infections. We now await a promised economic recovery plan which the President hinted at in his Saturday speech. Let us hope it will be short-lived as a plan, and longer-lived as an implemented reality.

On that note, have a good week, stock up if you need to, but do so safely!

Siobhan Redford

Local rates

With what was probably one of the stronger inflation-linked auctions since the increased issuance, we had both local and offshore accounts taking a keen interest in Friday’s auction. The National Treasury came to market to issue I2025s, I2038s and I2046s, which all cleared stronger than market. The I2025s cleared auction at 3.45 (market 3.48) with a bid-to-cover ratio of 3.51, the I2038s cleared auction at 4.78 (market 4.83) with a bid-to-cover ratio of 3.17, while the longer-dated I2046s cleared auction at 4.84 (market 4.87) with a bid-to-cover ratio of 3.06. Ahead of the auction, we had seen decent inflation demand from local real money accounts, the National Treasury issued 785m, 605m and 610m of the I2025s, I2038s and the I2046s, respectively. On the Interest Rate Derivatives desk, we are seeing decent two-way interest sub-10-yr on the IRS curve with mild bias for paying cares, while local fast money accounts were better receivers for the front end of the FRA curve. The vol market remains relatively quiet at the moment with a few requests for unwinding short-dated put options, on the nominal front, flows are not as pronounced with the market seeing better buying interest across the curve. Good luck for the rest of the week.