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Markets WRAP: Rand closes at R14.33/$

2019-04-30 08:38

Peregrine Treasury Solutions's Bianca Botes said earlier that the rand traded largely sideways throughout Monday, including during the overnight session as the focus remained on global factors including growth and oil prices.

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Last Updated at 09:57
30 Apr 17:25

The rand closed at R14.33 to the greenback on Tuesday afternoon.

The day's range was between R14.27 and R14.39.

Peregrine Treasury Solutions's Bianca Botes said earlier that the rand traded largely sideways throughout Monday, including during the overnight session as the focus remained on global factors including growth and oil prices.


30 Apr 16:41

Emerging markets limped toward the end of the month feeling the sting of a disappointing Chinese manufacturing report, poor industrial production data from Korea and a profit miss from Samsung Electronics.

The won and the rupiah led declines in foreign exchange, dollar-bond yield spreads widened relative to US Treasuries and the MSCI index of stocks, ignoring yesterday’s fresh record on the S&P 500, headed for its first retreat in three days.

Set against a backdrop of a stubbornly strong dollar, no resolution yet to the trade dispute and country-specific risks from Turkey to South Africa and Argentina, it wasn’t looking good almost exactly 12 months on from the start of the 2018 Turkey-contagion wobble.

A look at the seasonal history didn’t offer much comfort either. MSCI’s main emerging-market currency and stock indexes have declined during the month of May in seven of the past 10 years. All of which sharpens attention on the Federal Reserve tomorrow.

Credibility Challenge

Talking of idiosyncratic risks, Turkey’s central bank just released its quarterly inflation report. As of the time of writing, Governor Murat Cetinkaya was trying to say the right things on the thorny subject of using currency swaps to boost reserves, though he stressed that the details would come in an accompanying report. Markets weren’t impressed. The lira was on the cusp of dropping through 6 per dollar for the first time since October. It just seems that policy makers have too much work to do to regain credibility, especially after last week’s surprise removal of the commitment to raise rates further if necessary - something Cetinkaya tried to dial back today.

Throw in the Istanbul election dispute and the threat of US sanctions over the Russian missile purchase and there are few reasons for the lira to find any footing here. As Rabobank’s Jane Foley and Piotr Matys wrote today, a break higher seems inevitable, keeping the lira on track to revisit the October high at 6.2282 per dollar before long.

China Warning

Despite that uninspiring PMI report, the Shanghai Composite registered a 0.5% gain - possibly in anticipation of further easing - brightening the outlook as traders headed toward the three-day holiday. But as Bloomberg’s China equities team highlighted today, increased foreign share selling, waning performance relative to the rest of the world and a slowdown among momentum-driven stocks are taking the edge off sentiment. Adding to the gloom today: Kangmei Pharmaceutical, one of the country’s largest listed drugmakers, said it overstated cash holdings by $4.4 billion, triggering a 10% share slump.

Argentina Policy Change

Argentina’s kitchen-sink approach to shoring up the peso entered new territory yesterday. The central bank said it would step up intervention in the currency market following last week’s selloff, its fourth policy change in six weeks, prompting a 3.2% rally. The move entails effectively scrapping the non-intervention zone that the bank imposed last October as part of the deal with the IMF, which is managing a record $56 billion credit line for Argentina. It may look like throwing good money after bad, yet the IMF has given the policy its blessing, a crumb of comfort for President Macri in his anti-inflation battle. For the record, Bloomberg’s New York-based emerging-market strategist, George Lei, wrote a piece almost exactly a year ago saying the pattern of history suggested a gloomy outlook for the peso. Well, it’s lost 52% of its value since then.

Philippines Upgrade

Finally, the Philippines just got a debt upgrade from S&P Global Ratings, a welcome vote of confidence as the country prepares to tap capital markets with a Eurobond. The debt was lifted one step to BBB+ with a stable outlook, the nation’s first increase at the rating company in five years and a reflection of the encouraging economic backdrop. The rating is seven levels below the top grade and on par with Mexico, Thailand and Peru. Moody’s Investors Service has the Philippines one step lower at Baa2. - Bloomberg


30 Apr 13:02

OVERVIEW: US equity futures and European stocks edged lower on Tuesday while Asian shares slipped after earnings at the world’s biggest phone maker and at Google parent Alphabet disappointed investors.

Treasuries were steady a day before the next Federal Reserve policy decision. The Stoxx Europe 600 nudged into the red, led by declines in telecommunication and mining shares, as futures on the S&P 500 also pointed to a soft open in New York.

Tech stocks were poised to retreat following Alphabet’s worse-than-expected results after the Monday close, and after Korean giant Samsung Electronics’s profit missed analysts’ recently reduced estimates. Equities in Hong Kong, South Korea and Australia all dropped, though trading was quieter than usual thanks to a holiday in Japan.

Shares rose in Shanghai despite poor Chinese manufacturing data. The euro added to gains after regional GDP beat estimates and inflation in some of Germany’s regions accelerated in April. After a strong start to the year, many equity and bond markets appear to lack direction this week. Traders will be looking for signals from economic data, a Fed policy meeting on Wednesday and earnings reports from the likes of Apple, GE and McDonald’s.

“It’s not a stellar reporting season - I don’t think anyone expected that,” said Nick Nelson, head of European equity strategy at UBS, on Bloomberg television. “But it’s certainly better than the fourth quarter. And that fits with some of the stabilisation in the broader data in the euro zone, in emerging markets and in China.”

Meanwhile, the next round of trade talks between the US and China will get under way this week with significant issues still unresolved. But enforcement mechanisms are “close to done,” according to Treasury Secretary Steven Mnuchin.

Elsewhere, South Korea’s won tumbled to a fresh two-year low versus the dollar after Samsung’s profit miss and the disappointing China data.

These are the main moves in markets:

Stocks

Futures on the S&P 500 Index fell less than 0.05% as of 06:21 New York time. The Stoxx Europe 600 Index slipped 0.2%. The Shanghai Composite Index rose 0.5%, the largest rise in more than a week. The MSCI Asia Pacific Index dropped 0.1%. The MSCI Emerging Market Index declined 0.2%. 

Currencies

The Bloomberg Dollar Spot Index fell 0.1%. The euro rose 0.2%. The MSCI Emerging Markets Currency Index fell 0.1%. The South Korean Won fell 0.8% to the weakest in more than two years. 

Bonds

The yield on two-year Treasuries fell one basis point to 2.28%. The yield on 10-year Treasuries rose less than one basis point to 2.53%. Japan’s 10-year yield was unchanged at -0.04%. 

Commodities

Gold rose 0.4% to $1,285.12 an ounce. West Texas Intermediate crude rose 1% to $64.14 a barrel, the biggest advance in a week. LME copper increased 0.8%, the largest climb in almost two weeks. Iron ore climbed 2% to $93.40 per metric ton, the highest in more than two weeks. - Bloomberg


30 Apr 12:04

Poultry producer Astral [JSE:ARL] expects lower earnings due to a combination of higher feed prices, production related cost increases and lower selling prices for poultry, the group said.

According to a trading statement issued on Tuesday, the higher operating costs are attributed to Lekwa Municipality.


30 Apr 10:54

The rand traded largely sideways on Monday, says Peregrine Treasury Solutions's Bianca Botes.

By 10:53, the rand was trading at R14.33 to the greenback.

"This [includes] during the overnight session as the focus remains on global factors including growth and oil prices.

"The PMI from China disappointed this morning and the EU will release GDP figures today that are likely to remain subdued.

"SA is set to release trade balance figures today and, later, the US is due to release wage data and pending home sales which will be closely monitored by market participants."

She said the day's range was expected to be between R14.30 to R14.50.


30 Apr 08:43

Massmart announced on Tuesday that Mohammed Abdool-Samad, formerly of Illovo Sugar, would be taking over as its new chief financial officer with effect from 1 August 2019.

He succeeds Hans van Lierop who in February 2019 indicated that he was not available to extend his tenure with Massmart for personal reasons.

Van Lierop will be stepping down at the end of July, but would remain at the company until later in the year in an advisory capacity, said Massmart in an update to shareholders. 


30 Apr 08:38

Asia stocks drop as China data, Samsung disappoint

Andreea Papuc and Joanna Ossinger, Bloomberg

Asian stocks retreated Tuesday amid disappointing readings on China’s manufacturing and earnings at the world’s biggest phone maker.

South Korean and Australian stocks were lower in trading that was below average thanks to Japanese markets being closed. Korean giant Samsung posted profit that missed analysts’ recently reduced estimates.

Shares also fell in Hong Kong, though were higher in Shanghai.

Futures on the S&P 500 declined after the index on Monday edged up to a new record.

The Australian dollar, a proxy for bets on China’s economy, ticked lower in the wake of declines in Chinese manufacturing PMI readings for April. After a great start to the year, investors need to “be really focused on certain themes and certain sectors” now, Frank Benzimra, head of Asia equity strategy at Societe Generale SA in Hong Kong, said on Bloomberg Television.

This time around, China’s stimulus isn’t lifting all boats, which is “making us more cautions for the rest of Asia,” he said.

Consumer discretionary stocks are “one sector where I would buy the dip,” he added. In the US, consumer spending rebounded in March while the Federal Reserve’s preferred underlying inflation gauge eased to a one-year low, Commerce Department data showed Monday.

The Fed is expected to hold rates steady on Wednesday, though new growth and price data may affect its characterization of the economy. China purchasing managers indexes stayed in positive territory in April as the People’s Bank of China turned on the credit taps, though both the official and the Caixin gauges came in below the median estimates of economists.

Meanwhile, the next round of trade talks with China will get under way this week with significant issues still unresolved, but with enforcement mechanisms “close to done,” according to US Treasury Secretary Steven Mnuchin.


30 Apr 08:38

Crude wavers as world awaits Iran sanctions and supply impact

Crude flipped between gains and losses as investors await the impact of coming disruptions on Iranian oil.US and international benchmark oil prices barely moved Monday, dipping briefly negative before eking out gains of less than a percent each.

Still, futures traded in New York are on track to gain more than 5 percent in April, a boost that will - if it holds - help the US price post its best first four months of a year since 1999.


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