Markets WRAP: Rand closes at R14.40/$

The rand closed at R14.40 to the greenback on Friday afternoon.

The day's range was between R14.28 and R14.41.

Peregrine Treasury Solutions's Bianca Botes said earlier that the rand remained flat and mostly range-bound, with global markets finding some relief as Trump delays tariffs on car imports.

OVERVIEW: Stocks fell as China signaled a tougher stance in its trade war with the US. The dollar and Treasuries advanced. The S&P 500 headed for the first decline in four days after China’s state media indicated a lack of interest in resuming negotiations. Technology shares led benchmarks lower. Adding to woes, Deere & Co slumped after the company warned the trade spat was weighing on American farmers.

Futures briefly pared losses before the open after the Trump administration delayed by six months any tariffs on car imports from Europe and Japan. Ten-year Treasury yields pared a drop, while the dollar extended its rise after US consumer sentiment data reached a 15-year high. The yuan, already trading at five-month lows, slid further.

Oil traded above $63 a barrel.

“It’s bad for everybody. The trade war is bad for everybody,” said Olivia Engel, chief investment officer for active quantitative equities at State Street Global Advisors. “It’s impacting all equity markets - supply chain issues to all kinds of technology companies, which are so integrated and have been operating on a very free capital flow of money and components of trade for many years.”

Traders are reassessing prospects for a trade deal after commentary carried by the Communist Party’s mouthpiece accused the US of playing “tricks to disrupt the atmosphere.”

Indications that the talks have stalled will focus attention on the next opportunity for Presidents Xi Jinping and Donald Trump to meet - at the G-20 meeting in Japan next month. Meanwhile, iron ore rose to the highest level in almost five years, and crude oil climbed. The pound weakened as UK Prime Minister Theresa May agreed to set a timeline to quit and Labour leader Jeremy Corbyn walked out of cross-party Brexit talks.

MSCI’s gauge of emerging market stocks fell to its lowest since January. Bitcoin slumped as much as 14%, before paring losses as this month’s surge for cryptocurrencies was tested.

Here are the main market moves:

Stocks

The S&P 500 Index decreased 0.6% as 10:14 New York time. The Stoxx Europe 600 Index dipped 0.7%. The MSCI All-Country World Index declined 0.5%. The UK’s FTSE 100 Index fell 0.5%. 

Currencies

The Bloomberg Dollar Spot Index climbed 0.2% to the highest in more than 21 weeks. The euro was unchanged at $1.1174. The British pound dipped 0.4% to $1.2753, hitting the weakest in more than four months with its sixth consecutive decline. The Japanese yen climbed 0.2% to 109.63 per dollar. 

Bonds

The yield on 10-year Treasuries fell three basis points to 2.37%, the lowest in more than seven weeks. Germany’s 10-year yield decreased three basis points to -0.12%, the lowest in more than two years. Britain’s 10-year yield declined six basis points to 1.013%, the lowest in more than six weeks on the biggest decrease in eight weeks. 

Commodities

West Texas Intermediate crude climbed 0.7% to $63.30 a barrel, the highest in more than two weeks. Gold fell 0.1% to $1,285.51 an ounce. The Bloomberg Commodity Index declined 0.1%. - Bloomberg

Transnet announced on Friday that it had appointed Mark Gregg-Macdonald as its acting chief financial officer with effect from May 13, 2019.

"Greg-Macdonald will also serve on the Board of Directors of Transnet. The Board welcomes him to his new role and looks forward to his contribution to the Company."

Gregg-Macdonald is taking over from Mohammed Mahomedy, who was elevated to acting CEO earlier in the month.  

Senior Dealer at TreasuryONE Andre Botha said in a morning note to clients that the rand largely stuck within tight ranges on Thursday.

By 12.09, the rand was trading at R14.36 to the greenback.

"The rand at one stage looked like it wanted to break below the R14.10 level before a sustained break below R14.20 failed for the umpteenth time as the rand closed in the comfort of the mid- R14.20's. This clearly shows how the market is sitting on the fence waiting for fresh impetus as direction is lacking at the moment.

"Emerging Markets is on the back foot with a stronger dollar at the moment with the current uncertainty in the market with the trade deal between the US and China. Moody's released a statement yesterday stating that while South Africa has strengths, including a favourable government debt structure and a large pool of domestic investors, in the absence of effective policy change, the sovereign's credit profile will most likely continue to erode, with fiscal strength weakening and growth remaining low.

"This latest document from Moody's could hamper the rand a little as we await the cabinet from President Cyril Ramaphosa, which is the key event for the rand in the short term. Yesterday we saw the list of MP's brought forward by the ANC, which had a lukewarm reaction and possibly halted the rand downward momentum yesterday.

"This morning we have seen EMs under pressure as the US dollar is looking to extend some of its gains from last night. The rand poked its head above the R14.30 level in early morning trade but with no real events scheduled today, we could see sideways trading for most of the day."

Deutsche Bank bets on Chilean peso versus the rand

It’s a trade you don’t often see: shorting South Africa’s rand versus Chile’s peso. That’s what Deutsche Bank AG recommends, based on the diverging economic outlook underpinning the two currencies.

Stocks futures drop with no US-China talks planned

Adam Haigh, Bloomberg

US and European stock futures fell after a mixed session in Asia, where Chinese and Hong Kong shares took another leg down, with no talks yet scheduled between China and the US to address rising trade tensions.

China’s equity gauge tumbled 2% after local media said the country may have no interest in continuing trade talks with the US for now.

Futures on the S&P 500 Index fell, as did those on the Euro Stoxx 50. The yuan, already trading at five-month lows, dropped further. Japanese shares still managed to close higher, though off the session’s highs. South Korean stocks gave up gains and closed down.

Elsewhere, crude oil was flat and 10-year Treasury yields remained near their lows of the year. The yen edged up.

The US has been talking about wanting to continue the negotiations, but in the meantime it has been playing “little tricks to disrupt the atmosphere,” Taoran Notes, a WeChat blog run by state-owned Economic Daily, said Friday.

With the yuan among the world’s worst performers this month and heading back toward the much-discussed level of 7 per dollar, analysts are assessing the impact of the trade conflict for potential responses in China.

“In the near term there may still be some downside pressure on the currency,” in China, Tai Hui, a strategist at JPMorgan Asset Management, told Bloomberg TV in Hong Kong. But “there is a good chance the authorities in China will come back in and support the economy.”

Elsewhere, the pound remained under pressure as UK Prime Minister Theresa May faced a new threat to oust her.

Bitcoin fell as much as 14%, before paring losses as this month’s surge for cryptocurrencies was tested.