Markets WRAP: Rand closes the day at R14.15/$

The rand closed at R14.15 to the greenback on Wednesday afternoon, with a day's range of R14.14 to R14.36. The rand started the day out at R14.30/$ despite losing more ground on Tuesday where, at one stage, it was trading more than 4.5% weaker against the dollar over the past few trading sessions. 

All eyes now turn to Theresa May's leadership vote this evening. The pound has so far staged a comeback ahead of the vote.

US CPI came out at 2.2% year-on-year which was in line with what was expected, TreasuryONE said in an afternoon note. The figure was slightly higher

"The USD has been slightly on the back foot over the past hour as Theresa May seems to have shrugged off the first hurdle she faces but no announcement has been made. The GBP bouncing on the back of that and trading above 1.26 against the USD after its low of 1.2479 earlier. The rand has broken below 14.20 and is currently testing 14.17 level."

The rand was changing hands at R14.16 to the greenback at 16:15, strengthening by 1.22%.

OVERVIEW: Stocks rallied globally as the outlook for US-China trade took a positive turn. The pound strengthened as the British prime minister vowed to fight a challenge to her leadership. US equity futures and European shares climbed following big gains in Asia after Canada granted bail to the chief financial officer of China’s Huawei and President Donald Trump said he’d consider intervening in the case if it helps get a trade deal with China.

In the UK, markets took news that Theresa May will face a vote of confidence from the Conservative Party she leads in stride. Sterling gained as several ministers rushed to back her and she vowed to contest the vote “with everything I’ve got.” As well as the roller coaster news flow on the trade war and Brexit, investors are also keeping watch on the risk of a shutdown of parts of the federal US government, with Trump at odds with Democratic leaders in Congress over funding for a border wall with Mexico.

Elsewhere, oil jumped on the easing trade war rhetoric and after a US industry report signaled a bigger-than-expected draw in nationwide crude inventories. Treasuries edged lower after Trump warned the Federal Reserve against hiking interest rates this month. India’s bonds rallied after an ally of Prime Minister Narendra Modi was named as the new central bank chief.

And in France, the spread between government bond yields and those in Germany rose to the highest since the 2017 election. France’s Prime Minister Edouard Philippe confirmed that President Emmanuel Macron’s efforts to meet protester demands will have an impact on the country’s deficit, with the situation causing a new headache for the EU in its talks over the Italian budget. - Bloomberg

November inflation up slightly higher

November inflation figures increased by 0.1 of a percentage point to 5.2%.

The rand, which opened at R14.34 on Wednesday morning, was trading at R14.30 ahead of the data release.

Tokyo stocks close up as trade war fears ease

Tokyo stocks closed higher on Wednesday as fears about the US-China trade war eased following the release on bail of a Huawei executive.

The benchmark Nikkei 225 index rose 2.15% or 454.73 points to end at 21 602.75, while the broader Topix index was up 1.99% or 31.30 points at 1,606.61.

"Investor sentiment improved after media reports on China considering lowering tariffs on US cars and the release on bail of Huawei CFO" Meng Wanzhou, said Yoshihiro Ito, chief strategist at Okasan Online Securities, in a commentary.

Asian markets perked up by positive China-US trade news

Asian markets enjoyed healthy buying interest on Wednesday on much-needed good news on the China-US trade talks, while energy firms rallied with oil prices, though the pound remained beaten down by Brexit woes.

A flurry of positive developments in the tariffs stand-off between the world's top economies provided some early Christmas cheer on trading floors, fuelling hopes they can avert an all-out trade war.

Canada on Tuesday released on bail Meng Wanzhou, chief financial officer at Chinese telecoms giant Huawei, whose arrest last week sparked fury in Beijing and worries about a truce agreed at the G20 by Donald Trump and Xi Jinping this month.

No surprises for inflation - analysts

Analysts have shared expectations for consumer inflation, to be released at 10:00.

In a market update, NKC Economics shared views that inflation would tick up to 5.2%, from 5.1% reported in October.

While RMB Global markets Research expects inflation to remain at 5.1%, due to relatively stable fuel prices, said research head Nema Ramkhelawan-Bhana.

October retail sales data is also to be released today, at 13:00. NKC expects sales growth to accelerate to 2.5%, from 0.7% recorded in September.

NKC also expects the rand to trade within a range of R14.10/$ to R14.40/$.

Markets to focus on inflation

November inflation data is of interest given expectations of another rate hike early next year, RMB Global Research head Nema Ramkhelawan-Bhana.

Inflation is expected to remain unchanged at 5.1% due to relatively stable fuel prices.

Retail sales data is also expected to be released on Wednesday.

"As far as retail sales is concerned, we anticipate a modest uptick in the series, which would correlate to the mild increase in activity suggested by yesterday’s mining and manufacturing data that rose by 0.5% y/y and 3.0% respectively," she said.

"Both prints were above expectations and indicate that the third quarter’s growth momentum might well carry through to 4Q18. But, let’s not get ahead of ourselves, regardless of the improvement, economic activity remains lethargic and the full-year outcome is still likely to underwhelm relative to previous years."

After an ugly year, SA stocks may be set to rally

It’s been a rough year for South African stocks, but signals are emerging that they’re set for a rebound in 2019.

Cheap valuations, flows into US exchange-traded funds and optimism among global analysts are some of the factors that suggest South Africa’s $445bn (R6.389trn) equities market may recover from its worst year in the past decade.

Pound keeps falling on Brexit quagmire; global stocks mixed

The British pound fell again Tuesday due to mounting uncertainty over Prime Minister Theresa May's Brexit plan, while European bourses advanced amid bargain-hunting.

Wall Street experienced another volatile session, boosted by reports of progress in the US-China trade war, but buffeted by President Donald Trump's threat to shut down the government over border security funding.

Major US indices ended little changed.

Pound trading at 20-month low

A rebound in US government bond yields and the weakness of the pound saw the dollar near a one-month high, TreasuryONE noted in a snap update.

"The dollar index traded at the highest level since 13 November when it hit the high of 97.545 overnight as the GBP took a further blow late yesterday after parliament members told media that they believe there is enough support among members to mount a vote of no confidence in Theresa May.

"The 10yr US Treasury is back up at 2.88% after the Fed’s recent dovish comments pushed the benchmark yield to a three month low of 2.82%."

Opening indicators from TreasuryONE:

USDZAR 14.2769

EURUSD 1.1322

EURZAR 16.1533

GBPUSD 1.2506

GBPZAR 17.8440

AUDZAR 10.2985

CADZAR 10.6655

CNYZAR 2.0723

ZARJPY 7.9381

CHFZAR 14.3718

Gold 1 244.27 

Plat 782.40 

Plad 1 246.72 

Rhod 2 570.00 

Irid 1 470.00 

Ruth 268.00 

Copp 6 170.50 

Brent 60.84 

Gold ZAR 17 755.48 

Plat ZAR 11 164.69 

Rand stronger ahead of consumer inflation data release

The rand opened at R14.34/$ on Wednesday morning, and strengthened as much to R14.28/$ before 08:00.

Corporate Treasury Manager of Peregrine Treasury Solutions Bianca Botes on Wednesday noted that the rand gained ground as trade tensions between the US-China eased as there is potential of a beneficial trade deal being reached. 

The dollar lost some ground, but still outperformed the pound which is at a 20-month low.

Local inflation data for November is to be released at 10:00, it will indicate if an interest rate hike is likely.

US inflation data - also to bee released today - will indicate if the Fed may hike its rates.

The rand's expected range of trade is expected to be between R14.18 and R14.40 to the greenback.