Markets WRAP: Rand closes at R14.30/$

The rand closed at R14.30 to the greenback on Monday afternoon. 

The day's range was between R14.29 and R14.38.

Peregrine Treasury Solutions's Bianca Botes said earlier that even though SA was days away from heading to the polls, the rand was mostly taking its cue from global events at the moment.

This week will see US-China trade talks resume while data is also expected out of the US, China and Europe.

OVERVIEW: Stocks in Europe slipped and US index futures fluctuated at the start of a holiday-truncated week packed with data releases that will provide clues on global economic growth.

Treasury yields and the dollar edged higher, while oil fell. Retailers and oil companies led a decline on the Stoxx Europe 600 Index as crude extended its slide from a six-month high and data showed euro-area economic confidence at a two-year low.

Futures on the S&P 500 pointed to a steady US open after the underlying index reached a record on Friday. Equities in South Korea and Hong Kong climbed, while those in China and Australia dipped. The euro nudged higher while Spain’s benchmark stock index underperformed as Socialist Pedro Sanchez looked set to return as the country’s prime minister after snap elections.

Markets in Japan remained shut for holidays, with many others set to follow suit on May 1. Investors get a chance this week to assess whether the global economy and the steady flow of corporate earnings will continue to provide support for this year’s equity bull run. The immediate focus is on US personal spending data Monday, with any softness playing into the hands of those betting on the Federal Reserve cutting interest rates this year.

Traders will also continue to monitor high-level trade talks between China and America for signs of progress toward a more concrete deal.

Elsewhere, oil extended a decline following US President Donald Trump’s move to pressure OPEC to cut prices and as doubts grew about the impact of supply squeezes from Russia and Iran.

These are the main moves in markets:

Stocks

The Stoxx Europe 600 Index declined 0.2% as of 07:21 New York time. Futures on the S&P 500 Index fell 0.1%. The MSCI All-Country World Index fell less than 0.05%. The U.K.’s FTSE 100 Index fell 0.1%. The MSCI Emerging Market Index gained 0.4%, the biggest rise in almost two weeks. 

Currencies

The Bloomberg Dollar Spot Index increased 0.1%. The euro advanced less than 0.05% to $1.1155. The British pound climbed less than 0.05% to $1.2921. The Japanese yen fell 0.2% to 111.75 per dollar. 

Bonds

The yield on 10-year Treasuries climbed one basis point to 2.51%. Germany’s 10-year yield increased two basis points to 0.00%. Britain’s 10-year yield rose one basis point to 1.153%. 

Commodities

West Texas Intermediate crude decreased 0.2% to $63.15 a barrel, the lowest in more than three weeks. Gold declined 0.4% to $1,280.84 an ounce, the largest drop in almost two weeks. The Bloomberg Commodity Index fell 0.2%, reaching the lowest in seven weeks on its fifth straight decline. - Bloomberg

The rand is taking its cue from global events, despite the pending elections, says Bianca Botes, Corporate Treasury Manager at Peregrine Treasury Solutions.

By 10:53, the rand was changing hands at R14.31 to the greenback.

"With South African elections only eight days away, political bickering is intensifying, but with little effect on the rand. The local unit gained back some lost ground as the jump in US CPI overshadowed the strong GDP figure.

"The rand however struggled to keep the momentum, with R14.30 showing resilience in the rand’s efforts to gain more ground. 

"We have a busy data day on the cards with consumer sentiment, business climate and industrial and services sentiment due from the EU today, while the US will release personal income, spending and consumption today."

She said the rand was expected to trade within a range of R14.30 to R14.50.

China stocks fluctuate after worst week versus world since 2016

Bloomberg News

This year’s rally in Chinese shares is threatening to unravel almost as quickly as it began.The Shanghai Composite Index fell as much as 1.2% Monday, dropping below its 50-day moving average.

It eked out a 0.4% gain as of 13:49 local time. That follows its 5.6% slump last week, the worst performance versus global equities since early 2016. The ChiNext Index fell as much as 2.5%.

China was the best place in the world for equity investors in the first quarter, with all its major benchmarks entering a bull market and volume surging. The rally has lost momentum amid a lackluster earnings season, while better-than-expected economic data prompted investors to scale back their expectations for additional stimulus.

Data on manufacturing growth for April is due on Tuesday.

“The market needs to drop more to fully price in the expectations that China might tighten its monetary policy,” said Zhang Gang, a Shanghai-based strategist with Central China Securities. “Poor corporate earnings hurt confidence and profit taking in stocks that had reaped strong gains added to the selling.”

Traders have been taking profit from some of the year’s biggest winners, including brokers, 5G-related stocks and firms on the tech-heavy ChiNext Index. Eastern Communications, a maker of mobile communication products, has fallen nearly 40% from its March peak after surging more than 250% this year.

Mainland markets will be shut from Wednesday for a three-day break. While northbound trading remains open through Tuesday, investors in China are unable to trade Hong Kong stocks through the exchange links until May 6.

Volume on the Hang Seng Index, which rose 0.8%, was about 33% lower than the 30-day average for this time of day.

Brokerages fell as investors worried trading volumes in the country’s stock market may slide, with Northeast Securities and SooChow Securities declining. A gauge of brokers is down about 5% in April, paring its gain this year to 48%.

Asian stocks start week mixed after fresh US highs

Adam Haigh, Bloomberg

Stocks in Asia were mixed at the start of a week that’s packed with data releases that may provide clues on global economic growth. Volumes are likely to be down with Japanese markets shut for holidays.

Shares in South Korea, Hong Kong and China climbed, while Australian equities dipped. US stocks climbed Friday and the S&P 500 Index reached an all-time high amid a flurry of earnings reports. European futures were higher.

The euro was steady as Spain’s incumbent Socialist Prime Minister Pedro Sanchez was set to be re-elected, as widely expected.

Investors this week get a chance to gauge whether the recent soft patch in the world economy will linger, with data out from the US, Europe and China.

Underlying demand was softer than the headline number indicated in the US Friday, though some investors took comfort in the not-too-hot, not-too-cold first-quarter gross domestic product report.

Earnings season also rolls on, with five of China’s biggest banks due to report Monday. Next comes the US inflation report Monday.

Any softness would play into the hands of investors betting on a Federal Reserve interest rate reduction this year, with market pricing now indicating a more than 50 percent chance of a cut by September.

Traders will also continue to monitor high-level trade talks between China and the US for any signs of progress toward a more concrete deal.

Elsewhere, Treasury futures were flat, with the cash market shut until the London open due to Tokyo holidays.

Oil extended its slide following US President Donald Trump’s move to pressure OPEC to cut prices and as doubts grew about the impact of supply squeezes from Russia and Iran.