Markets WRAP: Rand closes at R14.36/$

The rand closed at R14.36 to the greenback on Monday afternoon. The day's range was between R14.32 and R14.45.

TreasuryONE said earlier that the rand, along with other EM currencies struggled after the ECB meeting last week as the bullish dollar caused the ZAR to test as high as R14.58.

OVERVIEW: Stocks gained across Europe and Asia and futures for the benchmark US gauge edged up as equity markets sought to shake off the worst week of the year. The dollar nudged higher. Banks led the Stoxx Europe 600 Index’s first advance in four sessions, with contracts on the S&P 500 and Nasdaq also pointing higher.

Dow futures showed the index likely to slip at the open after the Sunday crash of Boeing Co.’s 737 Max, with the US manufacturer the biggest component of the gauge. Boeing’s shares were down more than 9% in pre-market trading as China grounded flights involving the model. In Asia, Chinese shares outperformed, paring some of Friday’s losses, with stocks in Japan and Hong Kong also higher. The pound slipped as another key Brexit vote looms in parliament on Prime Minister Theresa May’s revised deal.

Treasuries declined while European bonds traded mixed. “With the Fed taking an easier path rather than continuing to raise interest rates, the outlook for equities is relatively constructive,” Hans Goetti, founder of HG Research, told Bloomberg TV from Singapore. A slew of data releases this week will be closely watched for clues on growth and the impact of central bank policy in the US, European Union and China, with the Bank of Japan the next to meet.

On the trade front, Beijing and Washington are in general agreement on many crucial issues and have held meaningful discussions on foreign exchange, People’s Bank of China Governor Yi Gang said.

Elsewhere, oil prices climbed as Saudi Arabia extended deeper-than-agreed production cuts into a second month. The Turkish lira held steady even as the country entered its first recession in a decade.

Here are some key events coming up: Chinese retail sales and industrial production data are all scheduled for release this week. The National People’s Congress is set to wrap up with a speech on Friday from Premier Li Keqiang. UK House of Commons votes Tuesday on May’s revised Brexit deal, 20 days before Britain is scheduled to leave the EU. US President Donald Trump is expected to release his proposed fiscal 2020 budget on Monday. Bank of Japan Governor Haruhiko Kuroda will speak on Friday, after he and his board meet to decide on monetary policy. 

These are the latest moves in markets:

Stocks

The Stoxx Europe 600 Index increased 0.1% as of 09:19 London time. Futures on the S&P 500 Index climbed less than 0.05%. The MSCI Asia Pacific Index increased 0.5%, the largest climb in two weeks. The MSCI Emerging Market Index increased 0.5%, the biggest climb in two weeks. 

Currencies

The Bloomberg Dollar Spot Index gained 0.1%. The euro rose 0.1% to $1.1244. The Japanese yen decreased less than 0.05% to 111.19 per dollar. The MSCI Emerging Markets Currency Index increased 0.1%, the biggest climb in two weeks. The Australian dollar increased less than 0.05% to 0.705 per dollar. 

Bonds

The yield on 10-year Treasuries gained two basis points to 2.64%, the first advance in more than a week. Germany’s 10-year yield decreased one basis point to 0.06%, the lowest in more than two years. Britain’s 10-year yield declined two basis points to 1.172%, the lowest in more than two weeks. The spread of Italy’s 10-year bonds over Germany’s rose three basis points to 2.469 percentage points. 

Commodities

The Bloomberg Commodity Index increased 0.2%. Brent crude gained 1.1% to $66.47 a barrel, the highest in more than a week on the largest rise in more than a week. LME copper gained 0.3% to $6,414.00 per metric ton. Gold decreased 0.1% to $1,296.73 an ounce. - Bloomberg

The rand has remained on the back foot as the week kicks off, Bianca Botes, Corporate Treasury Manager at Peregrine Treasury Solutions said in a morning note.

By 10:28, the rand was trading at R14.35 to the greenback.

"There is no local data due today, but we will keep an eye on the Eurogroup meeting and US retail figures this afternoon. The rand is in familiar territory following on from last week’s events, at R14.45/$ with a range of R14.42 to R14.58 expected for the day," she said.

Meanwhile, Botes said US jobs numbers for February were disappointing and "points to the slowing of the powerhouse economy".

"The USD remains resilient, however, concerns over global growth and EU uncertainty are still driving investors to the greenback, while the dollar index aims for a 2019 high."

Andre Botha, Senior Dealer at TreasuryONE said, "We did see the rand on a gallop higher in the latter part of last week after the ECB meeting and the momentum looked like the rand will continue on its merry way.

"However, the rand had a little reprieve on Friday with worse than expected Non-Farm Payroll numbers out of the US, where the US only added 20k jobs vs the expected 180k.

"This caused a brief halt in the weakening of EM's ... The news out of China has also been uninspiring, to say the least, with growth being revised downward and trade numbers coming out weaker than expected.

"This will keep EM's on the back foot and places more emphasis on the ongoing US-China trade talks to reach some kind of agreement.

"With bad US data and bad EM data, we can expect the rand to move between 'risk-on and 'risk-off' with regularity and we could see the rand being volatile in the short term. One key economic event will be Theresa May's Brexit vote that happens tomorrow, and this vote will give us a clear indication on how Britain will proceed with their Brexit plans. Only three options exist, with Britain either exiting on March 29, no exit or a delay, with the smart money being on a delay and kicking the can further down the road.  

"This week we have a full data release schedule with mostly second-tier data, with the US retail sales enjoying top billing. Once again more weight will be given to the Brexit vote and US-China trade talks and there is some risk to headlines driving the market.”

Absa sees revenue growth overtaking costs in 2019

Absa, South Africa’s third-largest lender, is forecasting that its revenue growth in 2019 will outpace that of cost increases after slower economic growth and a battered consumer weighed on its ability to generate income.

Adjusted earnings per share, which excludes items related to the separation from former UK parent Barclays, rose 4% to R19.1, Absa said in a statement.

Old Mutual misses profit target as SA economy wilts

Vernon Wessels, Bloomberg

Old Mutual said full-year adjusted earnings fell as a weak South African economy and sliding asset prices weighed on business and caused the insurer to miss its target for results from operations.

Adjusted earnings declined to R11.51bn compared with R12.95bn a year earlier, the Johannesburg-based company said in a statement.

“Persistently high unemployment rates, a value added tax-rate increase and fuel hikes contributed to lower real disposable incomes for our retail customers in South Africa,” it said.

“This adversely affected our customer acquisition and persistency, especially in the middle-income market.”

The insurer didn’t meet its target for growth in results from operations of gross domestic product expansion plus 2%.

While it is confident of hitting all its other objectives in the medium term, achieving the goal from operations will be difficult, Old Mutual said.

The operating results were hurt by changes in its net reserves, mortality and morbidity losses in its personal finance business and Zimbabwe’s currency challenges.

The 174-year-old insurer is reporting its maiden annual results since the company’s return to South Africa after a foray into London that culminated with Old Mutual selling off it US asset-management division, hiving off its UK wealth unit and some of its shares in the Nedbank Group, and started trading its remaining African businesses.

The stock has declined 1.7% this year following gains of 5.2% in 2018, the best performer that year in the FTSE/JSE Africa Life Assurance Index.