Markets WRAP: Rand ends the day at R13.69/$


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03 Dec 2018

Rand ends the day at R13.69/$

The rand ended the day 1.24% stronger at R13.69/$. The currency opened at R13.72 on Monday morning, and the day's trade ranged between R13.57 and R13.76.

The rand, along with other emerging market currencies had made gains, as the US and China reached a trade truce, which is expected to last for 90 days.

Absa also released the Purchasing Managers Index for November- which was up to 49.5 from 42.2 in October. This is the first improvement in four months, Bloomberg reported.

Vehicle sales data for November was also released and it contracted 4.6%, mainly due to a 5.4% decline in passenger sales. This is in contrast with the 1.7% growth in sales reported in October.

"Taking into account November’s weak result, total industry sales are down 0.9% y/y for the year to date, compared to the same period last year,"said Investec economist Lara Hodes. 

Investec is expecting the economy to move out of recession when StatsSA released third quarter GDP figures on Tuesday, Hodes added, "[We] anticipate moderate but growing economic growth going forward. Hopefully this will lead to a modest uptick in demand and so benefit domestic vehicle sales," she said.

Closing indicators from TreasuryONE:

USDZAR 13.6979

EURUSD 1.1350

EURZAR 15.5394

GBPUSD 1.2719

GBPZAR 17.4137

AUDZAR 10.0903

CADZAR 10.3862

CNYZAR 1.9882

ZARJPY 8.2812

CHFZAR 13.7323

R186 8.91%

US 10 Year 3.02%

JSE 3.17%

FTSE 1.47%

S&P 500 1.04%

Gold 1 233.31 

Plat 802.90 

Plad 1 205.00 

Rhod 2 590.00 

Irid 1 470.00 

Ruth 268.00 

Copp 6 306.65 

Brent 61.51 

Gold ZAR 16 885.37 

Plat ZAR 10 952.88 

Rand firms by almost 2% on US-China trade truce

03 Dec 2018

One of the consequences of the recent rout in Bitcoin is well underway. And it’s likely to have a profound effect on the leading cryptocurrency.

There is a consolidation going on among the so-called miners that perform the complex calculations to generate the digital currency after the plunge rendered many of them unprofitable. At least 100 000 individual miners have shut down, according to Autonomous Research. Fundstrat Global Advisors estimates that about 1.4 million servers have been unplugged since early September.

“We are entering in the phase when there’s a flushing out of the market,” said Malachi Salcido, head of Wenatchee, Washington-based Salcido Enterprises, which claims to be one of the largest miners in North America with 22 megawatts of power deployed and 20 megawatts more being built.

“There will be relatively few operations that come out the other side.” Most miners are only profitable when Bitcoin trades above $4 500. It hasn’t closed above that level since November 19. Late last year, Bitcoin traded for almost $20 000. Only a select few can afford to stay in the game: miners with scale, very specific business models and extremely low electricity costs, as in Douglas County, Washington, where most of Salcido’s operations are based.

Margins before costs like depreciation and taxes dropped from about 40% to 20% during the slide, Salcido said. They jumped back up at the company to around 40% as smaller rivals shuttered operations, he said. With the so-called hash rate - or mining power on the Bitcoin network - down 36% from its all-time peak this August, problem-solving difficulty has dropped about 10%, making it easier for the remaining mining rigs to earn Bitcoins, according to Lex Sokolin, the London-based global director of fintech strategy at Autonomous.

While that’s good for big miners, the consolidation increases risks for investors and others vested in the network’s success. With fewer companies controlling the mining, there’s a higher chance that several could band together to execute a so-called 51% attack, according to Ryan Selkis, co-founder of crypto researcher Messari. In such a maneuver, controlling miners can reverse transactions and stop new ones from confirming - potentially making off with billions in other people’s money.

Blockchains supporting much smaller coins like Bitcoin Gold and ZenCash have already suffered 51% attacks, which have cost investors millions of dollars. The contraction could also reduce the amount of investment even if prices recover, hampering the network’s use and growth.

"We note that the BTC price would need to re-accelerate substantially for mining to once again become self-funding, as it has been for most of Bitcoin’s history," according to a Fundstrat note published last week. Salcido credits his business model - the company owns all its rigs rather than hosting other miners - and low electricity cost. He is paying about 3 cents per kilowatt hour, or half of what miners pay in China, he said. Nearly all of the power serving Douglas County is generated at the Wells Hydroelectric project - from a dam set up on the Columbia River.

China-based Bitmain Technology, one of the industry’s biggest miners, just opened a 30 000-unit facility with 12 megawatts of mining power in East Wenatchee, Washington. Another competitor based in East Wenatchee, called Giga Watt, just filed for bankruptcy. Giga Watt essentially hosted small miners, and as a result, took only a share of the mining profits - which wasn’t big enough in today’s market squeeze.

Salcido, who says he has already weathered three other Bitcoin crashes during its 10-year history, doesn’t anticipate a quick turnaround.“I expect where we are at to possibly get a little worse before it gets better," he said. "Like all market bottoms, smart money is watching for the turn, that doesn’t happen usually quickly. It wouldn’t surprise me if the bottom is finally in February.” - Bloomberg

03 Dec 2018

OVERVIEW: Stocks climbed on Monday alongside Treasury yields and the dollar fell after the US and China declared a truce in their trade war. Oil surged on optimism producers will cut output. Miners and carmakers led gains in the Stoxx Europe 600 Index after President Donald Trump said in a late-night tweet that China agreed to “reduce and remove” tariffs on imported American-made cars.

Futures on the Dow, Nasdaq and S&P all pointed to a firmer open, and Asian shares advanced following agreement by the leaders of the two countries to hold off on new tariffs and intensify trade talks. Ten-year Treasury yields rose back above 3%. The euro strengthened on news in Italian media that the government may accept a lower deficit target.

Oil was jolted higher by efforts across the globe to support prices as Saudi Arabia and Russia extended their pact to manage the market and Canada’s largest producing province ordered unprecedented supply cuts, though optimism was dented slightly after Qatar said it was leaving OPEC.

The truce between Trump and President Xi Jinping at the Group of 20 summit in Argentina has gone some way in calming investor fears over the state of global growth. The US had been scheduled to push ahead on January 1 with increased tariffs on $200 billion worth of Chinese goods.

Going forward, traders will continue to focus on any OPEC-related headlines to gauge the likely scale of production cuts. “The meeting that we saw over the weekend was very much positive in terms of market sentiment,” said Kerry Craig, a Melbourne-based global market strategist at JPMorgan Asset Management of the Trump-Xi talks.

“So there’s a small ray of sunshine here but it’s too early to be very positive on the outcome.” Elsewhere, the pound ticked higher even as the threat of a vote to bring down British Prime Minister Theresa May’s government looms should Parliament reject her Brexit deal. That raises the stakes even further as lawmakers begin debating her plan this week.

China’s yuan climbed with emerging market assets. - Bloomberg

03 Dec 2018

The rand firmed by more than 2% on Monday morning, changing hands at R13.58 at 10:27. The day's range was expected between R13.57 and R13.77.

03 Dec 2018

Andre Botha, Senior Currency Dealer at TreasuryONE said in a morning note to clients, “It's only the start of the week, but we are already firmly strapped into the rand rollercoaster. We saw the local unit lose some ground in evening trade on Friday as the market crept into its shell in anticipation of the meeting between President Trump and his Chinese counterpart.

"We saw the rand trading in the high R13.80's heading into the meeting between the two Presidents. This morning we have seen the rand down at the R13.70 level, which indicates that the meeting between the two Presidents went quite well. They agreed to call a truce in the back and forth tariff setting, to allow the two countries to sit down and work through a reasonable plan to stop the trade war.

"This has buoyed markets and EM's are on the front foot this morning with momentum firmly on its side. However, South Africa has some important data out this week, that could either enhance the momentum or stop it dead in its tracks.

"The two data sets of interest are the South African GDP out tomorrow and the Current Account balance on Thursday. We saw the last reaction in the rand when the GDP printed poorly and although the market is expecting a better number than last, and failure in print could see the rand on the back foot.

"The weekend news of load shedding will also impact on the rand should this continue for an extended period as this will have an impact on growth and perk the ears of rating agencies again, and start the snowball rolling. Internationally, we have a quiet start to the week, but we have Fed Chair Powell testifying before Congress this week and the U.S non-farm payroll numbers out on Friday. These events will also give the market direction and we could be in for quite a volatile week.”

03 Dec 2018

Asia stocks in relief rally after China-US deal

Hong Kong and Shanghai led a surge across Asian markets on Monday after the United States agreed to suspend imposing tariffs on China for three months, while oil prices soared on expectations of a big production cut.

In a much-anticipated meeting between Donald Trump and Xi Jinping at the weekend, the heads of the world's two biggest economies hammered out a deal that will see them hold off on their tit-for-tat tariffs row, which has roiled global equities for most of the year.

The US will hold off raising levies on Chinese goods on January 1 while China promised to buy more from the US and enter a 90-day period of talks to bring an end to the dispute.

Asia stocks in relief rally after China-US deal

03 Dec 2018

Tokyo stocks rally after US-China G20 trade truce

Tokyo shares opened higher on Monday, with other regional bourses following suit, as investors breathed a sigh of relief after the US and China agreed to suspend new tariffs in their escalating trade war.

Investors returned to buying after the long-awaited meeting between US President Donald Trump and Chinese President Xi Jinping on the sidelines of weekend G20 talks in Argentina.

The leaders of the world's top two economies agreed not to impose new tariffs and to continue talking, lowering the temperature of a conflict that has spooked world markets.

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