Markets WRAP: Rand closes at R13.84/$

The rand closed at R13.84 to the greenback on Monday afternoon. The day's range was between R13.82 to R13.99.

This after TreasuryONE said in a morning note to clients that the rand opened firmer this morning as news that President Donald Trump had delayed the date for the imposition of new tariffs on Chinese imports buoyed markets.

Meanwhile Peregrine Treasury Solutions's Bianca Botes said earlier the day's range was expected to be R13.88 to R14.06. 

"The week ahead will see the release of local PPI, trade balance, manufacturing PMI and new vehicle sales figures, while the focus will largely fall on the US/China trade dynamic as well as the continuous analysis and critique of the Budget delivered last week," she said. 

Emerging markets are becoming more sensitive to the slings and arrows of the US-China trade dispute just as talks between the two sides enter their most crucial phase.

President Donald Trump said Sunday he’ll extend a deadline to raise tariffs on Chinese goods until he can meet his counterpart, Xi Jinping, spurring gains in the yuan.

With representatives of the two governments still haggling over a deal that would ensure Beijing lives up to its promise not to depreciate the yuan, the tendency of developing-nation currencies to shadow the dollar-yuan exchange rate is back near its highest since July.

Trump said the US and China have made “substantial progress” in the latest round of talks in Washington, which will help appease investors worried that an escalation of the trade war will derail global growth.

This week is also due to serve up a second meeting between the US President and North Korean leader Kim Jong Un, a rate decision in South Korea and gross-domestic-product reports from Brazil, India and Mexico. Not forgetting, of course, the result of the delayed election in Nigeria.

“It appears that progress is being made and in this respect it ought to buoy EM assets into this week,” said Mitul Kotecha, a senior emerging-markets strategist at TD Securities in Singapore.

“Markets have been anticipating some sort of a deal though there has been concern about structural issues.” - Bloomberg

OVERVIEW: US equity futures advanced alongside stocks in Europe and Asia after President Donald Trump postponed the date for boosting tariffs on Chinese imports, taken as a sign of progress in the trade talks.

Bonds fell and the dollar retreated. The headlines boosted carmakers and miners, fueling an advance in the Stoxx Europe 600 Index, with contracts on the Dow, Nasdaq and S&P all climbing.

In Asia, the Shanghai Stock Exchange Composite Index rallied the most since 2015 and the yuan strengthened after Trump said he will delay the March 1 trade deadline, and as comments from China President Xi Jinping suggested top officials will focus on growth rather than cracking down on leverage.

Emerging-market currencies and shares advanced despite China’s state-run Xinhua news agency later publishing a commentary saying talks will be harder at the final stage.

Treasuries and core European bonds slipped, while Italy’s securities advanced and the euro strengthened.

“This is a sigh of relief,” Ben Emons, managing director for global macro strategy at Medley Global Advisors, told Bloomberg TV. “Markets will still keep a level of caution, but this news is encouraging.”

The official delay from the US may give fresh impetus to extend a global rally in equities that was being tested amid an uncertain future on global trade and forecasts for global economic growth to ebb. Also in focus this week will be a hearing from Federal Reserve Chairman Jerome Powell, where investors will get the latest read on monetary policy.

Trump said the trade talks were productive. “The U.S. has made substantial progress in our trade talks with China on important structural issues including intellectual property protection, technology transfer, agriculture, services, currency, and many other issues,” he said in a Twitter posting on Sunday evening.

Elsewhere, Brent held above $67 a barrel and gold was steady, while copper extended gains on the Chinese optimism. The pound edged lower against the euro as UK Prime Minister Theresa May pushed back the deadline for Parliament to vote on her Brexit deal. - Bloomberg

Sasol reported a jump in first-half profit as the South African fuels and chemicals company enters a crucial year for its massive Lake Charles chemicals project in Louisiana.

Headline earnings per share increased by 32% to R23.25.

Key Insights

Sasol benefited from a rebound in oil prices for most of 2018, as well as a weaker rand relative to the dollar.

The company has also been helped by cost-cutting measures and efforts to save cash during the earlier three-year crude slump. The start up of Lake Charles marks a key shift in Sasol’s history, transforming the synthetic-fuels maker into a global chemicals player.

Earlier this month, the company announced a key milestone at the project, but also revealed that capital costs increased once again and startup will be delayed. By the end of December, the project was 94% complete and capital expenditure had reached $10.9 billion.

Despite the setbacks, co-Chief Executive Officer Stephen Cornell said the company is still confident the project will deliver a steady Ebitda run-rate of $1.3 billion in financial-year 2022. - Bloomberg

The rand woke up to a relatively good start, says Andre Botha, senior currency dealer at TreasuryONE. By 10:24, the rand was trading at R13.87 to the greenback.

“The rand looks like it has 'calmed' down after the antics last week with the budget speech and general feeling beforehand.

"The rand opened up this morning below the R14.00 level and with the good news out of the US-China trade talks, it is quite possible that the rand looks to edge lower.

"President Trump stated that the deadline for the talks will be extended past the March 1 date, due to the fact that significant progress has been made and a solution may well happen.

"This optimism from both sides has sent stock markets soaring which normally indicates a period of risky assets being the flavour of the week.

"This bodes well for the rand at the start of the week and with limited data out this week, we expect the rand to stay relatively range bound.

"However, a change in EM sentiment is only one headline or tweet away.”

Sasol announced on Monday morning that Stephan Schoeman, the Group Executive Committee member responsible for, among others, the group's Lake Charles Chemicals Project in Louisiana in the US, will be retiring. 

"Stephan joined Sasol in 1989 and has held various management positions in Sasol. He played a key role in our international expansion strategy when he was placed in Hong Kong and Germany. Stephan served as Managing Director of Sasol Infrachem from 2009 and was appointed Managing Director of Sasol Synfuels in 2011," the group said in a note to shareholders. 

Sasol said that, with effect from April 1 2019, project accountabilities for the LCCP will report to Fleetwood Grobler in his capacity as EVP:Chemicals Business.

"The commissioning and operations of the LCCP already report to Mr Bernard Klingenberg, who is the EVP responsible for Sasol operations globally," said Sasol. 

Stocks gain in Asia, yuan rises on trade optimism

Adam Haigh, Bloomberg

Asian stocks climbed with US futures and the yuan rose after US President Donald Trump postponed the date for boosting tariffs on Chinese imports, in the latest sign of progress in bilateral trade talks.

Chinese shares led the region higher after Trump said he will delay the March 1 deadline.

Equities in Japan, whose economy has been hit by the trade war, also jumped, though rallies fizzled in South Korea and Australia.

A gain in US futures also faded after China’s state-run Xinhua news agency published a commentary saying talks will be harder at the final stage. The yuan and Australia’s dollar also pared advances. Treasuries recouped a modest loss.

The official delay from the US may give fresh impetus to extend a global rally in equities that was being tested amid an uncertain future on global trade and forecasts for weakening economic growth.

Also in focus this week will be the Humphrey-Hawkins hearing from Federal Reserve Chairman Jerome Powell, where investors will get the latest read on policy. “This is a sigh of relief,” Ben Emons, managing director for global macro strategy at Medley Global Advisors, told Bloomberg TV. “Markets will still keep a level of caution, but this news is encouraging.”

Trump said the talks were productive. “The US has made substantial progress in our trade talks with China on important structural issues including intellectual property protection, technology transfer, agriculture, services, currency, and many other issues,” he said in a Twitter posting on Sunday evening.

Trade discussions had been extended over the weekend after Treasury Secretary Steven Mnuchin said the two sides agreed on a yuan currency provision, though four people familiar with the matter said no deal had been reached.

Elsewhere, oil held around $57 a barrel. Crude may rally further as OPEC cuts and sanctions on Iran and Venezuela create a shortage of heavy crude, Vitol Chief Executive Officer Russell Hardy said. 

Read Warren Buffett's annual Berkshire Hathaway shareholder letter

Warren Buffett says he wants to spend Berkshire Hathaway Inc.’s growing pile of cash on a giant acquisition, but he doesn’t see that happening anytime soon.

“Prices are sky-high for businesses possessing decent long-term prospects,” Buffett wrote in his annual letter to investors, adding that will lead to buying more public stocks in 2019. “We continue, nevertheless, to hope for an elephant-sized acquisition.”

Berkshire’s cash pile rose to $112bn, showing how hard it’s been for Buffett to put money to work as fast as Berkshire accumulates it. The legendary investor made his name by consistently outpacing the broader market, but that’s become harder as Berkshire has grown. - Bloomberg