Markets WRAP: Rand closes at R14.18/$

The rand closed at R14.18 to the greenback on Tuesday afternoon.

The day's range was between R14.13 to R14.23.

"The ZAR remained range bound but not without any excitement,"said TreasuryONE in a note to clients.

"The local currency was sold during the cause of the morning and it tested close to the 14.25 mark before Eskom’s better than expected financials steered the ZAR lower.

"Although the troubled SOE posted a R20,7bn loss during the 2019 financial year, the market consumed it as positive due to the expectation being R25bn.

"The ZAR caught some traction after the announcement and traded lower towards similar levels we saw this morning. A short while ago we also learned that Eskom has appointed SAICA CEO, Freeman Nomvalo, as their Chief Restructuring Officer who’s main focus will be to break up the power utility into the three units described in the SONA address earlier this year.

"The pound has remained under pressure as the Brexit saga continues to pull it down and the prolonged divorce caused the pound to post its lowest levels since March 2017 when it traded hands at 1.2121 earlier today."

MassMart says it estimates "with reasonable certainty" that for the six months to June 2019 the group will report an operating loss, before non-trading items, forex movements and net interest, of between R0 and R30m. 

Massmart shares dived some 26% after the retailer on Tuesday issued a sales and business update and trading statement for the 26-week period ended 30 June 2019. 

By 15:26, shares were changing hands at R48.97, down 17.32%. 

Walmart has a majority stake in the retailer, which added that sales growth had "slowed noticeably".

Oil gains as Fed meeting and trade talks buoy demand outlook

Heesu Lee and Grant Smith, Bloomberg

Oil rose as expectations that the Federal Reserve will cut interest rates and the resumption of trade talks between the US and China shored up the outlook for fuel demand.

Futures advanced 0.8% in New York, trading above $57 a barrel, after climbing by the most in almost three weeks on Monday. Later this week, the Fed is expected to lower borrowing costs for the first time in more than a decade.

Chinese and American negotiators gather for two days of talks on Tuesday, while US government data on Wednesday is forecast to show crude stockpiles fell for a seventh week, by 2.5 million barrels last week in a Bloomberg survey of analysts.

Oil is still on track for a modest monthly decline as concerns about demand weakness overshadow the threat that political tensions in the Persian Gulf will disrupt exports. Fed Chair Jerome Powell’s post-meeting press conference Wednesday will give clues to what’s in store for the rest of the year, possibly determining the fate of many developing economies for the coming months.

“The current situation and the outlook for the oil market aren’t so bad, with tightness likely to persist for the rest of the third quarter,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “The fears of a demand slump were overdone, and the market is now taking a more realistic approach.”

The rand stayed within a narrow band on Monday, trading between R14.18/31 to the greenback, with the local unit touching R14.14 in overnight trade.

By 10:34, the rand was changing hands at R14.19/$.

"We expected some consolidation in the rand given the spike that it had over the past couple of days and the lack of news flow in the early part of the week," said Andre Botha, senior dealer at TreasuryONE.

"However, the fun will start later on today and with the release of the Eskom financials ... it is difficult to say whether this will have an impact on the rand, but should the financials come out worse than expected, the size of Eskom problems will be known and it won't be good for the South African economy, which could spill over to the rand.

"We still have the US-China trade talks that will be ongoing that could be rand positive if a deal is reached soon but the longer it drags out, the more uncertainty ... and the markets and the rand could be on the back foot.

"The FOMC interest rate decision will also have a bearing on the direction in the rand. This places two-way risks for the Rand with a slight bias to the rand weakening.

Meanwhile the pound continues to take a hammering.

"We have seen the pound taking a hammering on the back of new PM Johnson's insistence that he could push for a no-deal Brexit should the terms with the EU be unfavourable.

"The GBP is currently trading a 1.2144 against the US dollar and R17.2300 against the rand.

"Stock indices across the world were mixed clearly indicating the uncertainty in the market at the moment. We expect the rand to be on the back foot with the uncertainty of the Eskom financials being the unknown variable." 

US futures, Asia stocks edge higher

Andreea Papuc, Bloomberg

US futures and most Asian stocks edged higher Tuesday as investors awaited news from the resumption of US-China trade talks.

The pound dropped to a two-year low, and the yen gained as the Bank of Japan left interest rates unchanged.

Shares saw modest gains in Japan, South Korea and China. Australia’s benchmark closed at a record high. Hong Kong stocks also rose despite continuing protests in the city, with China warning that unrest had gone “far beyond” peaceful protest.

European futures flagged a muted start to trading. The British pound extended a slide as the possibility of a no-deal Brexit increased. Treasury yields were little changed and the dollar touched its highest in almost two months.