Markets WRAP: Rand closes at R13.42/$

The rand closed at R13.42 to the greenback on Tuesday afternoon. The day's range was R13.34 to R13.43.

TreasuryONE's Andre Botha said earlier, “We have seen the rand trading in tight ranges as the market is taking a bit of a breather in anticipation of the two State addresses from the US and South Africa respectively this week.

"We saw the rand trade on the back foot for most of yesterday as the dollar turned slightly stronger most likely on the back of some momentum after Friday's non-farm payroll number.

"With little in the way of news flow out in the South African session, we expect the rand to drift in tight ranges with some action most likely in the evening trade.

"One eye needs to be kept on headline news from the US-China negotiations, but the main factor will be tonight with President Donald Trump.”

Oil erased its earlier gains as traders weighed output cuts from OPEC and its allies against expectations for rising US crude inventories. Futures in New York traded 0.3% lower, reversing an earlier increase of as much as 1.2%.

Russia curbed output by 47 000 barrels a day in January from its October baseline level, the country’s Energy Minister Alexander Novak said.

This is slightly slower than its earlier pledge to OPEC.

Meanwhile, US government data due Wednesday is expected to show American crude inventories rose for a third week. Crude has rallied about 20% this year as the Organisation of Petroleum Exporting Countries cut output by the most in two years, which was part of an output pact with allies including Russia. Rig data signaled US shale drilling is slowing down despite record output from the nation, while a battle for leadership of oil-rich Venezuela threatens further disruption to supplies.

Still, there remain lingering concerns about the health of the global economy and a possible impact on oil demand growth.“There are basically two market drivers: one is thinking the Venezuela sanctions and OPEC cuts are pushing prices up,” says ABN Amro Senior Energy Economist Hans van Cleef.

“On the other hand we still see some worries on global growth and that leads to a very small trading range.”West Texas Intermediate crude for March delivery traded at $54.17 a barrel on the New York Mercantile Exchange, down 39 cents, at 08:05 in New York, having earlier reached as high as $55.21. The contract declined 70 cents to $54.56 on Monday.

Brent for April settlement lost 39 cents to $62.12 a barrel on the London-based ICE Futures Europe exchange. The contract fell 24 cents to $62.51 on Monday. The global benchmark crude was at a $7.63 premium to WTI for the same month. Novak said Russia is “fully complying with obligations in line with earlier announced plans to gradually cut output by May,” although the nation had previously said it would reach its target in the first quarter.

Still, Saudi Arabia’s Energy Minister Khalid Al-Falih said last month that Russia’s reductions were slower than he would like, although he was certain the country can ultimately contribute to balancing the market.

Output from OPEC’s 14 current members fell by 930 000 barrels a day last month to 31.02 million barrels a day with Saudi Arabia cutting deeper than it pledged, according to a Bloomberg survey of officials, analysts and ship-tracking data.

In the US, crude inventories probably increased by 1.5 million barrels last week, according to a Bloomberg survey of analysts before Energy Information Administration data. - Bloomberg

OVERVIEW: European stocks advanced on Tuesday as strong earnings from oil giant BP gave some direction to otherwise listless markets.

US equity futures drifted higher and the euro and pound edged lower. The Stoxx Europe 600 Index headed for the sixth gain in a row, even as chip suppliers Infineon Technologies and AMS issued warnings about future growth.

BP was a major part of that advance, spurring energy shares as it joined Big Oil peers with an earnings beat.

Futures for the S&P 500 Index fluctuated in a narrow range in the wake of Monday’s rally. Sterling fell slightly following a weak services report, while Europe’s common currency also struggled as disappointing data from Italy hung over the euro area.

In Asia, many markets were shuttered for the Lunar New Year holidays. Australian shares jumped the most in more than two years as financial stocks rallied after the results of a yearlong inquiry into misconduct in the industry. Japanese equities nudged higher.The relative calm in markets belies an undercurrent of uncertainty as trade talks between the US and China remain unresolved and America lurches toward another government shutdown.

Investors will be watching President Donald Trump’s second State of the Union address later for any more signs of political rancor.

In Australia, an index of financial stocks advanced to the highest since November after a Royal Commission report stopped short of demanding a structural overhaul of the scandal-plagued industry, or tighter lending rules that would threaten profits.

The Aussie dollar reversed a slide after the central bank left interest rates unchanged.

Elsewhere, West Texas oil climbed as traders weighed output cuts from the OPEC producer group and its partners against expectations for rising US crude inventories. Among key events in the coming days: Asian markets closed Tuesday. China, Hong Kong, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan, Pakistan Earnings season continues, with reports this week from Twitter, Hasbro, Ryanair, Disney, Philip Morris, BNP Paribas, ING, MetLife, Societe Generale. Trump delivers a delayed State of the Union address Tuesday. On Wednesday, Federal Reserve Chairman Jerome Powell gives his first public comments following the January FOMC meeting and rate decision. Central banks in India and the UK set rates this week.

These are the main moves in markets:

Stocks

Futures on the S&P 500 Index gained 0.1% as of 10:07 London time. The Stoxx Europe 600 Index rose 0.8%. The UK’s FTSE 100 Index jumped 1.1%. The MSCI Asia Pacific Index rose 0.3% to the highest in almost four months. The MSCI Emerging Market Index gained 0.1%.

Currencies

The Bloomberg Dollar Spot Index rose less than 0.05%. The euro decreased 0.2% to $1.1418. The British pound dipped 0.1% to $1.3016. The Japanese yen fell 0.1% to 109.99 per dollar.

Bonds

The yield on 10-year Treasuries gained less than one basis point to 2.73%. Germany’s 10-year yield rose two basis points to 0.19%. Britain’s 10-year yield was little changed at 1.273%.

Commodities

Gold declined less than 0.05% to $1,311.60 an ounce. West Texas Intermediate crude gained 1% to $55.12 a barrel. - Bloomberg

Shares in JSE-listed packaging manufacturing business Mpact rose 13% on Tuesday after after it released a trading statement saying it expected its underlying earnings per share for the year ended 31 December 2018 to increase by more than 20%.

The group's audited results for the year ended 31 December 2018 will be released on or about March 13, 2019.

Mpact [JSE:MPT] shares opened the day at R22.60 and were trading at R24.00 at 11:30. 

The dollar has consolidated its recent gains overnight and with most Asian markets being closed for the Lunar New Year holidays, trading has been subdued, TreasuryONE said in a morning note to clients.

"The euro is currently at 1.1435, the pound at 1.3040 and the rand at 1.1341."

By 09:37, the rand was trading at R13.39 to the greenback.

"Wall Street closed up, led by tech stocks. The Nasdaq was up 1.15% and the Dow and S&P up around 0.70%. Markets are looking for fresh impetus and will likely focus on Trump’s State of the Union address tonight.

Locally, we have Cyril’s State of the Nation speech on Thursday and the opening of parliament. Gold is steady at yesterday’s lower levels at $1 315.53 and Brent at $62.70." 

Meanwhile Bianca Botes, Corporate Manager at Peregrine Treasury Solutions echoed some of the same sentiments. 

"The rand traded slightly softer on Monday as the dollar clawed back some lost ground following a rise in US treasury yields and renewed investor appetite establishing a new range of R13.20/$ to R13.50 for the local unit in the short term. 

"The South African Standard Bank PMI and US manufacturing data are both due for release today, which should set the tone for the currency.

"The has an expected range of R13.33 to R13.50 for the day."

Tokyo stocks flat, Australian banks surge 

Tokyo stocks were flat Tuesday as investors keep a close eye on corporate earnings reports, while Australian financials were lifted after an inquiry into the sector was considered more lenient than feared.

With most Asian markets closed for Lunar New Year business was thin, though Japanese, Australian and New Zealand traders were given a positive lead from Wall Street, supported by hopes for China-US trade talks and a slower pace of rate hikes by the Federal Reserve.

By lunch the benchmark Nikkei 225 index in Tokyo inched down 8.39 points, to 20 875.38, though the broader Topix index rose 0.25%, or 3.91 points, to 1 585.24. The Nikkei dipped despite the dollar rising to 110.00 yen in early trade, from 109.92 yen in New York and 109.74 yen in Tokyo on Monday.

Traders may get more cautious in the coming hours ahead of US President Donald Trump's State of the Union address due on Tuesday, analysts said.

In Tokyo share trading Toyota rose 0.75% to 6 777 yen ahead of its earnings report later this week, while small car specialist Suzuki was up 0.40% at 5 737 yen ahead of its earnings later Tuesday.

Wellington was up 0.7% and Sydney jumped more than 2%, with Australian banks leading the way after a year-long Royal Commission inquiry into financial services scandals referred more than 20 cases to regulators and called for substantial changes in the sector. However, it did not call for criminal prosecution, disappointing some observers who had demanded heads of individual senior executives who allowed or perpetuated the repeated misconduct and breaches. -AFP

Board walkout at PIC may risk investments

A deepening crisis at South Africa’s biggest money manager the Public Investment Corporation is threatening to cast a pall over the economy and throw into doubt potential deals, including the bailout of one of the nation’s largest clothing retailers.

Nine PIC directors quit on Friday, saying the institution overseeing the pension funds of most South African civil servants has entered a “state of paralysis” following misconduct claims against some board members.

Those included questionable investments in the bonds of cash-strapped state power producer Eskom and the purchase of shares in an overvalued and a little-known technology company.

The state-owned money manager with more than R2trn in assets is typically front and center of major domestic investments in South Africa, including rescue talks to help debt-laden retailer Edcon stay afloat in a depressed consumer environment and stagnant economy.