Markets WRAP: Rand closes at R14.21/$

The rand closed at R14.21 to the greenback on Monday afternoon.

The day's range was between R14.16 to R14.31.

President Ntuli appointed as new managing director of HPE South Africa

HPE has announced President Ntuli as the new Managing Director of Hewlett Packard Enterprise South Africa, effective August 1, 2019. 

Ntuli joins HPE from Dimension Data, where he was Regional Executive: Sales, South East Africa, and was responsible for driving Dimension Data GTM sales and execution strategy across their brands including Britehouse, Advanced Infrastructure and Dimension Data System Integration. 

Before joining Dimension Data, he spent over six years at HPE, leading the Servers' Business Unit and in various sales manager roles, HPE said. 

HPE said: "President has over 18 years’ experience in IT and brings with him a wealth of expertise covering general management and leadership, solving complex customer situations through consulting led engagements, local industry knowledge, finance and auditing expertise and an understanding of commercial value proposition and much more."

In his new role, he will be responsible or overseeing a broad hardware, software and services portfolio, driving further growth and maintaining high levels of customer and partner satisfaction.

The pound and gilt yields slid to multi-year lows as UK Prime Minister Boris Johnson stepped up preparations for a no-deal Brexit with just about three months left until the nation exits the European Union.

Sterling tumbled the most among the Group-of-10 currencies as various members of Johnson’s top team took a tough stance. UK Chancellor Sajid Javid said he was stepping up Treasury preparations for no-deal and top aide Michael Gove wrote in the Sunday Times that the government was “working on the assumption” the talks with the EU would fail. 

Johnson, a former mayor of London, is seen as more likely to try to push through a no-deal Brexit than his predecessor Theresa May and Morgan Stanley sees the pound falling to as low as parity with the dollar if Britain exits the EU without an agreement.

“Sterling should remain under pressure and head toward $1.20 levels over the coming months if early elections materialise and the Conservative party under PM Johnson runs on a ticket of a divisive Brexit stance versus the EU," said Petr Krpata, a currency strategist at ING Groep NV.

Sterling slid as much as 1.1% to $1.2244 in London, the lowest level since March 2017. It weakened 1% to 90.80 pence per euro. The yield on UK 10-year government bonds fell as much as six basis points to 0.63%, the lowest level since August 2016.

The prime minister told reporters on Monday that a no-deal departure from the EU was “absolutely not” the assumption but said it was still responsible to prepare for that outcome.

Johnson continued to say that the Irish border backstop plan is "dead". His comments came after Irish Foreign Minister Simon Coveney reiterated Friday that the Brexit withdrawal agreement, in which the backstop plays a key part, was closed.

The market has shifted to price in around a 50% chance of a no-deal Brexit from around 20% previously, according to Mizuho Bank’s head of hedge fund currency sales Neil Jones. The FTSE 100 Index of stocks surged as much as 2.2%, the most since January, on conviction a weaker pound will boost the earnings of export-reliant companies. - Bloomberg

OVERVIEW: US equity futures drifted, European stocks rose and Asian shares fell at the start of a packed week featuring everything from the resumption of trade talks between the world’s two biggest economies to an expected Federal Reserve rate cut and the monthly American payrolls report.

Contracts for all three main US gauges traded little changed after the S&P 500 closed at a record high Friday.

Most European benchmarks struggled for traction, though the UK index jumped after the London Stock Exchange Group’s investors backed its proposed $27 billion deal to acquire Refinitiv, the financial data and trading platform provider.

Deutsche Telekom AG rose the most in almost 10 months after the US Justice Department gave the green light for its T-Mobile US unit to acquire Sprint Corp.

Automakers lagged as major carmakers prepare to report results this week and Heineken NV shares fell after the brewer reported a hit to earnings growth. Asian benchmarks declined, with poor Korean earnings and increasing angst about protests in Hong Kong pulling stocks down.

The pound fell for a third day as Prime Minister Boris Johnson’s cabinet begins daily meetings to plan the UK’s exit from the European Union on October 31. Most bonds in the region climbed.

BMW and Fiat Chrysler's issues show up in stock underperformance. Investors will be picking through any developments on trade as Chinese and American negotiators gather Tuesday for two days of talks, three months after negotiations broke down. Neither side is signaling much hope for a breakthrough. Meanwhile, Fed Chairman Jerome Powell’s post-meeting press conference on Wednesday will provide an opportunity to gauge the trajectory of US rates after the central bank is tipped to ease policy.

On a related theme, traders will eagerly await monthly employment data from the world’s largest economy at the tail end of the week.

“The market has fully baked in a 25 basis point cut,” Eugenia Victorino, SEB head of Asia strategy, said on Bloomberg TV. “The markets are now pricing in a protracted negotiation” on trade, she also said. “We don’t expect much breakthrough.” Corporate earnings will remain a focal point as investors stay vigilant for any signs that a global economic slowdown is being reflected in companies’ bottom lines.

Among major earnings this week are Apple, Rio Tinto and carmakers Toyota and BMW. Elsewhere, oil traded near $56 a barrel in New York. China’s yuan retreated the most in three weeks as liquidity in Hong Kong made it cheap to short the currency.

These are the main moves in markets:

Stocks

Futures on the S&P 500 Index were little changed at as of 11:24 New York time. The Stoxx Europe 600 Index rose 0.1%.Germany’s DAX Index declined 0.1%. The UK’s FTSE 100 Index gained 1.2% to the highest in more than 11 months on the biggest rise in almost six weeks. The MSCI Asia Pacific Index decreased 0.4% to the lowest in more than a week.

Currencies

The Bloomberg Dollar Spot Index was little changed at the highest in almost two months. The euro was little changed at $1.1125, the weakest in more than two years. The Japanese yen was little changed at 108.65 per dollar. The British pound decreased 0.4% to $1.2331, the weakest in more than two years.

Bonds

The yield on 10-year Treasuries dipped one basis point to 2.06%. Britain’s 10-year yield fell three basis points to 0.662% to the lowest in about three years. Germany’s 10-year yield declined two basis points to -0.39% to the lowest in more than three weeks.

Commodities

Gold was little changed at $1,419.55 an ounce. West Texas Intermediate crude was little changed at $56.18 a barrel. - Bloomberg

Asia markets down as US-China trade talks loom

Asia markets were mostly down Monday, with investors cautious ahead of US-China talks in Shanghai this week and amid more civil unrest in Hong Kong.

Two-day discussions begin on Tuesday with a Washington delegation led by White House Trade Representative Robert Lighthizer.

But analysts are pessimistic about a resolution to the year-long trade dispute between the world's top two economies that has seen $360bn in tariffs imposed on bilateral trade."Hoping for the best but preparing for the worst best describes my view," said Vanguard Markets managing partner Stephen Innes. "We are not overly optimistic about a positive Shanghai surprise."

Hong Kong was among the biggest downward movers on Tuesday with the Hang Seng Index falling 1.2%, after a fresh round of violent protests in the financial hub.

Pro-democracy protesters in the financial hub fought a second consecutive day of running battles with police on Sunday evening in a well-heeled residential district, a day after clashes at a banned rally in a town near the border with mainland China.

China's top policy body on Hong Kong affairs was set to hold an extremely rare press briefing on Monday afternoon on the crisis engulfing the financial hub.

ICYMI: Tough week for rand and it could get worse 

The rand this week weakened to above R14/$, mainly on the back of the announcement of an Eskom bailout and geopolitical events, and an analyst has warned it could breach R15/$ in the long term.

The local unit started its decline earlier this week, after Finance Minister Tito Mboweni on Tuesday tabled a special appropriations bill for Eskom to receive R59bn from government over the next two years. The currency declined by 0.6% to R13.94 at the time, Bloomberg reported.

The rand has struggled to make meaningful recoveries since then and weakened as much as 1.5% on Thursday to close at R14.08/$ - following a report by Moody's, warning that the Eskom bailout would be credit negative.

A dovish statement by the European Central Bank also contributed to the rand's weakness. "The euro rapidly lost ground against the dollar and the rand quickly followed suit," Treasury partner at Peregrine Treasury Solutions, Bianca Botes explained in a market report.

Volatile week ahead for rand

The rand is in for a volatile week, says Bianca Botes, Treasury partner at Peregrine Treasury Solutions.

The local unit lost 3% in two days last week on the back of a dovish European Central Bank statement, strong US GDP figures and a negative Fitch outlook.

The focus this week turns to the US Federal Reserve’s interest rate announcement due on Wednesday. "The Federal Reserve has been widely anticipated to cut rates by between 25 and 50 basis points next week however, following today’s data, the market is clearly leaning towards the shallower end," Botes said.

This week local employment figures and trade balance data will be released this week and may further add to the rand’s volatility.   

Rand opens at R14.28/$

Opening indicators from TreasuryONE:

USDZAR 14.2875

EURUSD 1.1127

EURZAR 15.8898

GBPUSD 1.2368

GBPZAR 17.6620

AUDZAR 9.8606

CADZAR 10.8440

CNYZAR 2.0715

ZARJPY 7.5961

CHFZAR 14.3767

Gold 1 420.42 

Plat 866.01 

Plad 1 527.07 

Rhod 3 505.00 

Irid 1 470.00 

Ruth 251.00 

Copp 5 941.00 

Brent 63.23

Gold ZAR 20 284.11 

Plat ZAR 12 366.97