Markets WRAP: Rand closes at R14.13/$ | Fin24
 
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Markets WRAP: Rand closes at R14.13/$

2019-02-18 08:39

TreasuryONE said earlier that the rand was likely to remain under pressure this week with the lead up to the Budget speech on Wednesday.

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Last Updated at 10:58
18 Feb 17:20

The rand closed at R14.13 to the greenback on Monday afternoon. The day's range was between R14.03 and R14.13.

TreasuryONE said earlier that the rand was likely to remain under pressure this week with the lead up to the Budget speech on Wednesday.


18 Feb 15:11

OVERVIEW: Stocks in Europe and US futures drifted after a rally in Asia boosted shares to their highest level since October on optimism over China’s economy and trade talks.

Commodities from oil to copper climbed. The Stoxx Europe 600 nudged higher as gains by telecommunications companies offset declines in carmakers, after President Donald Trump received a report that may be a preliminary step to raising tariffs on auto imports.

US equity-index futures drifted following a positive session in Asia, where China’s credit growth helped ease worries of a slowdown in the biggest regional economy and optimism for a trade detente with the US boosted risk appetite ahead of talks in Washington this week.

The yen slipped with the dollar, while the euro strengthened despite dovish comments from a European Central Bank governing council member. A gauge of commodities climbed the most since December, with WTI oil futures rising to around $56 a barrel. US exchanges are closed for Presidents’ Day.

Even with fresh optimism in Asia, trade continues to dominate global markets as the economic superpowers race to reach a deal that would avert a tariff increase on Chinese goods by March 1, a deadline President Trump has said he may extend.

Over the weekend, Trump said the talks have been “very productive.” President Xi Jinping also sounded upbeat, reportedly saying the latest round of meetings “achieved important progress in another step”.

“The market has a view that there will be an extension or a deal along the way,” Erik Nielsen, chief economist at UniCredit Group, told Bloomberg TV. Overall, “the Americans don’t believe in multilateralism any more. So we are moving constantly towards a less-good scenario, and global trade is suffering.”

Investors may also get further guidance on US monetary policy this week. Minutes from the Federal Reserve’s most recent meeting will likely show how much conviction there was among policy makers to suspend their interest-rate hiking campaign.

Elsewhere, the pound strengthened after seven members of the UK Parliament said they’ll stand as independents after quitting the main opposition Labour Party over issues including Brexit and antisemitism.

Emerging-market assets climbed.

Here are some key events coming up:

The Federal Reserve will on Wednesday publish minutes from its recent meeting. Bloomberg Economics thinks officials aimed to over-correct to avoid a repeat of the negative reaction to December’s statement, so a focal point will be how much the hawks were on board with the switch. Bank of Canada Governor Stephen Poloz speaks on Thursday; ECB President Mario Draghi speaks on Friday, the same day Reserve Bank of Australia Governor Philip Lowe gives parliamentary testimony. Australia’s central bank releases meeting minutes on Tuesday. Indonesia rate decision is also due Thursday.

These are the main moves in markets:

Stocks

The Stoxx Europe 600 Index gained 0.1% as of 12:28 London time, the highest in almost 19 weeks. The Shanghai Composite Index jumped 2.7% on the biggest jump in more than 15 weeks. The MSCI Asia Pacific Index increased 1.2% on the largest climb in more than two weeks. The MSCI Emerging Market Index increased 0.7%, the biggest climb in more than two weeks.

Currencies

The Bloomberg Dollar Spot Index declined 0.1% to the lowest in more than a week. The euro jumped 0.3% to the strongest in more than a week. The British pound increased 0.3% to the strongest in more than a week. The MSCI Emerging Markets Currency Index increased 0.2% to 1,639.22, the biggest climb in more than two weeks. The Indian rupee fell 0.2% to 71.356 per dollar, the weakest in more than a week.

Bonds

Germany’s 10-year yield gained one basis point to 0.11%. Britain’s 10-year yield advanced one basis point to 1.17, the largest gain in a week. Australia’s 10-year yield climbed four basis points to 2.1425%.

Commodities

The Bloomberg Commodity Index jumped 1.2% to 80.96. Iron ore rose 1.2% to $85.87 per metric ton. West Texas Intermediate crude gained 0.7% to $56.00 a barrel, hitting the highest in three months with its fifth consecutive advance. - Bloomberg


18 Feb 12:58

Andre Botha, Senior Dealer at TreasuryONE says some optimism has sprung up over the weekend due to the fact that the US and China announced plans to resume trade talks in Washington.

"This has boosted confidence that a trade deal can be struck after news filtered through at the start of last week that negotiations weren't going too well.

"The news has helped Asia stocks trade in the green and the injection of positive sentiment for risky assets could spread into positive news for the Rand. This risky asset positive news flow has been backed up with the US dollar losing some ground and is currently trading above the 1.1300 level against the Euro. 

"However, the rand is still under a bit of a dark cloud after being the worst performing EM currency in the past week. Much of the focus for the rand will be on the budget of Wednesday and it is quite feasible that the rand could trade within in tight ranges up until Wednesday with the market waiting for the budget.

"Expect a quiet lead up to the budget with the rand hovering around the R14.00 handle for most of the day.”

By 12:59, the rand was trading at R14.06 with a day's range of R14.03 to R14.10.


18 Feb 09:44

Budget expectations

Finance Minister Tito Mboweni is expected to present a budget that is better than October’s MTBPS, economists of RMB Global Markets Research Mpho Tsebe and Elena Ilkova 

"This is because year-to-date (YTD) expenditure growth of 4.6% is well below the MTBPS projection of 7.7% and the five-year historical average of 8.1% at a similar time of the year.

"Given the nature of underspending, particularly the underrun in capital projects in the Department of Transport, it is unlikely that expenditure will accelerate in the remaining fourth quarter of FY18/19 to catch up to the 7.7% projected at MTBPS," they explained.

"Extrapolating the YTD spending trend for the full year, expenditure could be revised lower by R43bn in FY18/19. This would be more than sufficient to curtail the R18.2bn shortfall in tax revenue and also gives government some wiggle room to potentially provide Eskom with a cash injection of about R10bn-R15bn to alleviate the entity’s immediate liquidity constrains."

"The size and structure of the provision of support for Eskom will be a critical consideration.

"Eskom remains a significant fiscal risk and providing it with financial support might be credit-neutral for the sovereign, only if this is accompanied by broader measures to stabilise the power utility.

"If support is not part of simultaneously taking broader measures (such as a significant cost-saving drive or tariff hikes), the implication for the sovereign would be credit-negative."


18 Feb 09:31

Rand starts the day at R14.08/$

The rand opened at R14.08/$ on Monday morning, it was the worst performing emerging market currency last week.

It lost as much as 3.4% ahgainst the US dollar, mainly due to developments at Eskom.

"The rand could claw back some losses this week if markets perceive Wednesday’s budget as positive," RMB Global Markets Research economists Mpho Tsebe and Elena Ilkova noted in a market update.

Also in a market update Botha, senior dealer at TreasuryONE, said that news of the resumption of trade talks between the US and China could be good news for the rand. 

"The news has helped Asia stocks trade in the green and the injection of positive sentiment for risky assets could spread into positive news for the rand.

"The rand is still under a bit of a dark cloud after being the worst performing emergency market currency in the past week. Much of the focus for the rand will be on the budget of Wednesday and it is quite feasible that the rand could trade within in tight ranges up until Wednesday with the market waiting for the budget.

"Expect a quiet lead up to the budget with the rand hovering around the R14.00 handle for most of the day."


18 Feb 08:47

Asian markets rally on growing trade deal hopes

Asian markets rallied with oil and high-yielding currencies Monday as investors grow increasingly confident that China and the United States will eventually hammer out a deal to end their long-running trade war.

While talks ended Friday in Beijing with no deal, negotiators shift to Washington this week with Donald Trump saying discussions were going "extremely well" and suggesting he could extend a March 1 truce deadline for an agreement to be reached.

The high-level discussions between the economic superpowers are expected to yield a memorandum of understanding ahead of a meeting between Trump and his Chinese counterpart Xi Jinping to finalise a pact.The upbeat mood in Asia follows a strong lead from Wall Street, while a bipartisan deal to avert another US government shutdown and the Federal Reserve's recent dovish tone on interest rates have also provided support.

The positive news comes at a crucial time as China's economy stutters and the global outlook looks less certain, with the US also showing signs of slowing. "With a weakening US economy, the motivation for both sides to get something agreed in the short term is quite high as they still debate the more structural issues that lurk in the background," Sunny Bangia, a global equities fund manager at Antipodes Partners, told Bloomberg TV.

Tokyo ended the morning session 1.8% higher, while Hong Kong added 1.7% and Shanghai rose 1.6% as data at the weekend showed a surge in new Chinese loans, indicating moves to kickstart growth. Sydney put on 0.4%, Singapore and Seoul each gained 0.9%, Taipei jumped 1% and Wellington edged 0.2% higher. - AFP 


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