Markets WRAP: The rand closed at R14.47/$

The rand closed at R14.47 to the greenback on Thursday afternoon.

The day's range was between R14.35 and R14.53.

TreasuryONE said in a note earlier that the rand was holding on to Wednesday's gains despite the stronger dollar. 

The SA Reserve Bank also announced earlier that interest rates would remain unchanged at 6.75%.

OVERVIEW: Stocks slumped globally on Thursday and traders took refuge in gold and bonds as the simmering trade dispute between the world’s two largest economies took a greater toll on markets. The yen gained alongside the dollar, while 10-year Treasury yields fell to their lowest since 2017.

The S&P 500 Index fell for a second straight day, and the Dow Jones Industrial Average lost as much as 406 points, after the Chinese Communist Party’s flagship newspaper published two commentaries assailing US moves to curb Chinese companies.

Energy shares slumped as West Texas crude fell below $60 a barrel. Risky assets remain under pressure and havens in demand as investors dig in for what looks like a protracted trade dispute. One expert predicts tensions could endure until 2035, while economists are also turning more pessimistic.

Goldman Sachs Group now sees higher odds of a stalemate between the two nations, and Nomura Holdings has shifted to forecasting a full-blown escalation of tariffs.

"Sentiment has shifted to a more negative view, mainly on the trade concerns," Chris Gaffney, president of world markets at TIAA, said in an interview. "Where previously, I think, the market may have been a bit overly optimistic about a trade deal - obviously overly optimistic when you look back - now investors are starting to realise this deal that was previously thought to be around the corner may now not happen until well after the elections."

The Stoxx Europe 600 Index headed for its worst day in two weeks as automakers tumbled after an EU official said the US was unlikely to start trade talks with the bloc soon while it’s preoccupied with China. The pound weakened against the euro for a record 14th day as the prospect of Prime Minister Theresa May being forced from power brought yet more uncertainty over the UK’s Brexit strategy.

The common currency dipped against the dollar as measures of German business confidence and euro-area output missed expectations, and as voting got underway in European elections. Elsewhere, China’s yuan dipped in onshore trading even after the People’s Bank of China set its daily fixing at a stronger-than-expected level for a fourth straight day.

West Texas crude was headed for its biggest two-day drop of the year as inventory data alleviated concerns over a supply crunch. Commodities added to their drop on Wednesday, when they slumped across the board as traders increasingly girded for a full-blown trade war.

These are the main moves in markets:

Stocks

The S&P 500 Index declined 1.2% as of 10:06 New York time. The Stoxx Europe 600 Index decreased 1.5% to the lowest in more than a week. The UK’s FTSE 100 Index fell 1.5%. The MSCI Emerging Market Index fell 1.5% to a 19-week low. 

Currencies

The Bloomberg Dollar Spot Index climbed 0.2% to its highest in more than five months. The euro declined 0.1% to $1.1136, the weakest in four weeks. The British pound dipped 0.2% to $1.2643, the weakest in 20 weeks. The Japanese yen advanced 0.5% to 109.82 per dollar. 

Bonds

The yield on 10-year Treasuries fell five basis points to 2.33%, the lowest in about 18 months. Germany’s 10-year yield fell three basis points to -0.12%. Britain’s 10-year yield declined five basis points to 0.961%, a 23-month low. 

Commodities

West Texas Intermediate crude decreased 4.2% to $58.80 a barrel, the lowest in 10 weeks. Gold gained 0.8% to $1,283.81 an ounce. - Bloomberg

The SA Reserve Bank has kept interest rates unchanged at 6.75% with prime at 10.25%, which was largely expected.

TreasuryONE said in a note that the rand was still trading around R14.48/$, weaker on the back of the stronger USD.

Full-blown trade war quickly shifting from risk to baseline

After months of predicting a trade deal between the world’s two largest economies, economists at some of the biggest financial institutions are growing increasingly pessimistic.

Goldman Sachs, Nomura Holdings and JPMorgan Chase and Co. are among those that have rewritten their forecasts as US President Donald Trump threatens to impose a 25% tariff on around $300 billion of additional Chinese imports.

Analysts at Nomura have made that hike in duties - which would mean practically all of China’s exports to the US are hit by tariff hikes - their baseline forecast. They see it as a 65% probability before year-end, and most likely to come in the third quarter.

PwC and Massmart both announced new CEOs on Thursday. 

PwC Southern Africa said Shirley Machaba will become its new CEO from July 1, taking over from Dion Shango, who is set to become PwC Africa’s new CEO. 

Massmart, meanwhile, announced the appointment of Mitchell Slape as its new chief executive officer.

Slape succeeds Guy Hayward, who in May 2019 indicated his intention to resign and step down. 

Massmart said Hayward will remain in Massmart until later in the year to ensure an orderly handover and transition.

The group said Slape's prior roles include Chief Operating Officer at Seiyu (Walmart Japan); Chief Operating Officer at Bharti Retail (India); and Senior Vice President, Superama Supermarkets (Walmart de Mexico), among others. 

Brait flags drop in net asset value amid 'challenging' business environment

JSE-listed investment holding company Brait announced a sharp drop in its net asset value on Thursday amid a "challenging" business environment.

Global stocks, US futures drop as trade worries deepen

Adam Haigh and Andreea Papuc, Bloomberg

US and European futures tracked a slide in Asian stocks on Thursday as worries over US-China tensions grew. India bucked the trend, with equities there soaring as election results showed Prime Minister Narendra Modi is set to win a majority on his own.

Shares fell from Tokyo and Sydney to Hong Kong and Shanghai. The MSCI Asia Pacific Index has now dropped 6% since President Donald Trump pledged to ramp up tariffs on China earlier this month, giving up about half its gains for the year. S&P 500 futures and European contracts indicated losses will continue when markets open.

The yuan remained under pressure Thursday after China’s flagship People’s Daily published two commentaries assailing American moves to curb Chinese companies. Treasuries held recent gains. The pound extended losses amid an escalating Brexit crisis.

In India, shares hit a record high and the rupee climbed as counting pointed to Modi winning another term, with his Bharatiya Janata Party surging to a commanding lead.

On the US-China front, economists are turning more pessimistic. Goldman Sachs Group now sees higher odds of a US-China stalemate, and Nomura Holdings has shifted to forecasting a full-blown escalation of tariffs.

Treasuries continue to benefit from haven demand, with 10-year yields near their lows for the year.

“We don’t think that there is an overnight solution,” said James Johnstone, co-head of emerging and frontier markets at RWC Partners. “The accommodation of China as a rising power is something that the Americans and the West have been contemplating for a long time. This will be a 20-30 year accommodation.”

China’s yuan dipped in onshore trading even after the People’s Bank of China set its daily fixing for the yuan at a stronger-than-expected level for a fourth straight day.

The Aussie slipped, and Australian government bond yields plumbed fresh all-time lows.

Treasuries rallied on Wednesday after minutes of the Federal Reserve’s last policy meeting showed officials judged their patient approach to interest-rate changes would be appropriate “for some time.”

Lack of faith in a speedy resolution to the trade conflict helped lead Bank of America to cut its forecast for US yields.

Elsewhere, Britain’s pound is trading near its January low as Theresa May’s premiership hangs by a thread amid a growing revolt over her Brexit handling. Crude oil fell below $61 a barrel after inventory data showcased supply concerns.