Markets WRAP: Rand closes at R13.70/$, while stocks struggle on Brexit developments

Rand closes at R13.70/$, while stocks struggle on Brexit developments

The rand ended the day at R13.70/$, having opened at R13.72 to the greenback on Wednesday morning.

The day's trade ranged between R13.65 and R13.76. Statstics South Africa also released retail sales data for November, which reflected growth of 3.1% mainly due to promotional events- Black Friday and Cyber Monday.

Globally the pound fluctuated and UK stocks fell before a no-confidence vote in Prime Minister Theresa May’s government, Bloomberg reported. This comes after British parliamentarians voted against the deal she struck with the EU.

  In other global developments, oil traded near levels of $52, on the back of falling crude inventories in the US.

Retail sales in November climbed 3.1% on the back off Black Friday and Cyber Monday sales.

Statistics South Africa on Wednesday released the November figures, which were above market expectations, Investec economist Lara Hodes said in a report.

"An analysis of the retail sales performance in November suggests that the lift in the headline outcome was broad based, with five of the seven sub-categories contributing to the result," she commented.

The main contributors to growth came from the general dealers' category, having grown 3.7% year-on-year and contributed 1.6 percentage points to growth.  

This was followed by retailers in textiles, clothing, footwear and leather goods which grew by 4.2% and contributed 0.8 of a percentage point to growth.

Retailers in household furniture, appliances and equipment grew by 13.5% and contributed 0.7 of a percentage point to growth.

Oil trades near $52 on signs of falling US crude inventories

Oil fluctuated near $52 a barrel in New York amid signs that crude inventories fell again in the US, the world’s biggest consumer.Futures slipped 0.9% after settling 3.2% higher on Tuesday.

US crude stockpiles fell by 560 000 barrels last week, an industry report was said to show, a smaller decline than that forecast in a Bloomberg survey before government data due Wednesday.

Saudi Arabia’s energy minister said he was sure inventories will start to "return to normal averages and this will increase confidence" in the market.

Stocks struggle as treasuries drop; pound drifts

Stocks struggled to hold gains and Treasuries dropped as investors weighed the political turmoil in Britain and the prospects for policy makers to arrest a slowdown in global growth.

The pound fluctuated and UK stocks fell before a no-confidence vote in Prime Minister Theresa May’s government.

Futures on the S&P 500 and Dow Jones edged higher, while those on the Nasdaq were flat. Declines for consumer-goods companies offset gains for banks and insurers as the Stoxx Europe 600 Index pared an early advance.

Bianca Botes, Corporate Treasury Manager at Peregrine Treasury Solutions said the sharp drop in the GBP/ZAR rate witnessed in the overnight session has since corrected slightly.

"The rand hit its strongest level to the USD in more than four weeks ... Moody’s has confirmed its optimism about the future of South Africa, expecting GDP growth of between 1.3% and 1.5% in 2019, as long as we are able to keep the lights on.

"Market participants will start positioning themselves for the Turkish interest rate decision today, while the SARB will release its decision tomorrow.

"Both central banks are likely to keep their respective rates unchanged.   The expected range for the rand today is R13.74 to R13.85."

At 12:24, the rand was changing hands at R13.69 to the greenback.

Andre Botha, Senior Dealer at TreasuryONE says the rand is in for another subdued day of trading "in very tight ranges with a slight strengthening bias".

“The rand is currently sticking to the narrative that there is a slight EM bias at the moment due to the Fed dovishness putting every other event in its shadow.

"The slight EM bias was again in evidence yesterday, as the US dollar strengthened against the euro, with the rand also stronger against the US dollar, which was not normally the case in the past couple of months.

"We expect some rand adjustment with the US dollar being on firmer footing. A key event happened yesterday with Theresa May's defeat in parliament last night by 432 votes to 202 dominates markets this morning.

"She now faces a no-confidence vote later today on the back of this defeat. Despite the uncertainty, the pound has rebounded sharply and is trading at 1.2860 this morning. The MPC meeting starts today, with the outcome of the meeting being revealed tomorrow.

"The expectation is that the MPC will hold rates unchanged and this should not have an impact on the markets. This leaves us with the same narrative as the past couple of days, with the rand in tight ranges but we feel that the rand could run out of puff at these levels and a correction might be in the offing.”

Hong Kong opens lower

Hong Kong stocks eased soon after opening on Wednesday morning following a more than two percent rally the day before.

The Hang Seng Index eased 0.47%, or 127.36 points, to 26 702.93.The benchmark Shanghai Composite Index eased 0.05%, or 1.27 points, to 2 569.07, while the Shenzhen Composite Index, which tracks stocks on China's second exchange, inched down 0.59% to 1 322.57 - AFP 

Tokyo stocks open lower with lack of fresh headlines

Tokyo stocks opened slightly lower on Wednesday, with the currency market stable in Asian trade after the British pound fluctuated before and after the Brexit deal vote.

The benchmark Nikkei 225 index slipped 0.19% or 38.39 points to 20 516.90 in early trade while the broader Topix index was down 0.23% or 3.60 points at 1 539.12.

Investors appeared to have factored in the defeat in Britain's parliament for Prime Minister Theresa May's Brexit deal, which was overwhelmingly rejected by lawmakers.

Pound down as investors weigh worst-case Brexit scenario

The pound fell in Asian trading as investors started to weigh a worst-case Brexit after Prime Minister Theresa May’s plan was roundly defeated by UK lawmakers.

Sterling weakened against most its Group-of-10 counterparts, while traders said flows were thin as most investors were staying on the sideline after Tuesday’s whipsaw session.

While May is expected to survive a vote of no confidence that will take place on Wednesday, uncertainty over how she will put together a new deal is spurring risk aversion.

“Tuesday night’s vote may have increased the chances of a second referendum but it also increased the chances of a no deal Brexit,” said Sue Trinh, head of Asia foreign-exchange strategy at Royal Bank of Canada in Hong Kong. “Both tails are now a bit fatter and GBP volatility has risen accordingly.”