Markets WRAP: Rand ends week at R13.79/$

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18 Jan 2019

Global stocks on the up - AFP 

Stock markets rebounded more than one percent Friday, buoyed by hopes of a breakthrough in the US-China trade war.

European and Asian indices bounced back after the Wall Street Journal reported that the US was considering lifting tariffs on China as officials look to hammer out a trade deal.

US stocks gained Thursday on the report, recovering from a wobble triggered by news that the US was carrying out a criminal probe into Chinese tech giant Huawei.

"Global markets are enjoying an overwhelmingly bullish end to the week, with hopes of a potential breakthrough in US-China trade talks helping drive optimism throughout both Asia and now Europe," said Joshua Mahony, senior market analyst at traders IG.

The WSJ reported that US Treasury Secretary Steven Mnuchin had raised the idea with US Trade Representative Robert Lighthizer of removing some or all levies on Beijing in return for structural reforms.

In South Africa, the JSE All Share was up 0.8% by 16:30 at 53 859 points. 

18 Jan 2019

Rand down slightly against dollar in afternoon

The rand was slightly weaker against the dollar in afternoon trade on Friday, reversing some early minor gains. 

At 15:20 the local currency was trading at R13.78/$, after opening the day at R13.72 to the greenback. 

The JSE All Share index was up 0.6% at 53 764.46 points by midafternoon, with the Financial index level and gains for the Industrial and Resource indices. 

18 Jan 2019

Tesla cuts 7% of jobs, predicts 'very difficult' road ahead

Tesla will cut its full-time employee headcount by 7% with Chief Executive Officer Elon Musk saying the "road ahead is very difficult" for the electric-car maker. The shares dropped 5.6% in US pre-market trading.

The California-based company managed to eke out a profit in the fourth quarter, Musk said in a blog post on Friday, but it was lower than the what the company achieved in the third quarter.


18 Jan 2019

The rand was trading at R13.80/$ by midday.

Andre Botha, senior dealer at TreasuryONE, noted in a market update on Friday morning that the rand would trade within a range of R13.65 and R13.90 against the greenback.

The local currency opened at R13.72/$ on Friday morning.

The dovish comments from fed officials and a rumour that the US will ease tariffs on China will continue to dominate market moves.

"We expect the rand to continue trading in tight ranges, and we could have some EM (emerging market) bias with further news from the US-China trade talks."

18 Jan 2019

Volatility hedge funds hit by market woes in all directions

Some of the nimblest hedge-funds that trade volatility are hoping history doesn’t repeat after suffering their worst year in over a decade.

Managers famed for posting steady profits from relative-value strategies, which shuffle between long- and short-volatility bets, lost a record 2.5% in 2018, according to Cboe Eurekahedge data.

You’d think funds that profit from swings would thrive from crazed markets. But these rarefied players were sunk instead by erratic moves in implied volatility and an outsized spike in US equity angst versus the rest of the world.


18 Jan 2019

Oil set for longest weekly rally since October on OPEC's curbs

Oil headed for its longest weekly rally in three months on easing concern over whether the OPEC+ coalition will follow through on its pledge to slash production.

Futures gained as much as 1.5% in New York, with gains over the past three weeks totaling about 16%.

OPEC’s production fell by the most in almost two years in December before a fresh round of cuts started this month, and Russia is aiming to speed up the pace of its curbs.

Prices are still over 30% below a four-year high in October, as record output from the US threatens to undermine the reductions by other nations.

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18 Jan 2019

Stocks rise as trade optimism adds fuel to rally

Stocks in Asia gained Friday, building on the recent rally in risk assets, amid optimism for progress in US-China trade talks.

Shares in Tokyo and Hong Kong led the advance, while futures pointed to a higher start to the European session.

The S&P 500 Index on Thursday exceeded its 50-day average for the first time since December after the Wall Street Journal reported Treasury Secretary Steven Mnuchin proposed easing China tariffs.


18 Jan 2019

Tokyo stocks open higher on US-China trade rumours

Tokyo stocks opened higher on Friday, tracking gains on Wall Street as investors took heart from a report the US could lift trade tariffs on China.

The benchmark Nikkei 225 index rose 0.27% to 20 456.83 in early trade while the broader Topix index was up 0.27% at 1 547.35.

"Following gains in US shares, Japanese shares are seen trading positively" in early hours, Toshiyuki Kanayama, senior market analyst at Monex said in a commentary.

A weaker yen against the dollar is also supporting Japanese shares, analysts said.


18 Jan 2019

Reserve Bank hawk migrates, makes way for gentle doves - analysts

"The SARB hawks that circled in November 2018 seem to have migrated, making space for gentle doves," analysts from RMB Global Markets Research noted.

In their update, Nema Ramkhelawan-Bhana, Mpho Tsebe and Kim Silberman, highlighted that although it was expected the bank would keep rates unchanged at 6.75%, it was unanticipated that the bank would lower the inflation profile. 

"The inflation trajectory was lowered – due largely to subsiding oil and food price pressures, while the number of hikes projected by the Quarterly Projection Model was reduced to one 25bp increase compared to the three reflected in November.

"Lower inflation and lower rates paint an extremely dovish picture relative to that of the last Monetary Policy Committee meeting," the update read.

With inflation expected around 4.5%, RMB expects one rate hike in the latter part of the year.

As for exchange rates, the rand-dollar exchange is expected to range between R13.65 and R13.85. However the rand-pound exchange may be more volatile as the pound is on a near two-month high on rumours of a second Brexit referendum. 

Reserve Bank keeps repo rate unchanged at 6.75%

18 Jan 2019

Hong Kong stocks open higher on trade hopes

Hong Kong stocks rose in the opening few minutes of trade on Friday, tracking a healthy lead from Wall Street fuelled by a report the US was considering easing tariffs on Chinese goods as part of a drive to reach a trade deal.

The Hang Seng Index climbed 0.89% to 26 993.44.

The benchmark Shanghai Composite Index added 0.32% to open at 2 567.74, while the Shenzhen Composite Index, which tracks stocks on China's second exchange, was 0.12% up at 1 310.69, AFP reported.


18 Jan 2019

Interest rates predicted to remain unchanged till mid-year

Analysts from NKC Economics forecast that interest rates will remain unchanged at current levels - at least until mid-year. This is due to the "favourable outlook" for headline inflation in 2019, NKC noted in a market update.

"The slower pace in global monetary policy tightening will be an additional supporting factor.

"The reality in South Africa remains one where administered prices are the main culprit in keeping inflation above the mid-point of the target band, thus out of reach of the SARB's monetary policy efforts.

"This was clearly illustrated in November’s CPI release, with the CPI excluding administered prices reported at only 3.8% y-o-y vs. headline CPI at 5.2% y-o-y."

As for the rand's movements, NKC noted that the currency remained stable throughout Thursday hovering above R13.70 to the greenback, but depreciated sharply above R13.80/$ following the announcement that rates would remian at 6.75%

"However, ZAR recovered losses again overnight amid USD softness. Expected range today R13.60/$ - R13.85/$."

18 Jan 2019

Rand starts at R13.72/$

The rand opened at R13.72/$ on Friday, this after it briefly lost ground to trade at R13.80/$ following the rates announcement on Thursday.

The bank kept rates unchanged at 6.75%.

Adam Phillips – treasury specialist at Umkhulu Consulting- attributed the move to the SA reserve Bank explaining there may only be one hike this year. Previously the SARB projected a few hikes.

Further to the central bank's announcement – Governor Lesetja Kganyago continued to defend the bank's independence which is enshrined in the Constitution, in light of the ANC proposing a review of its mandate in the manifesto launched last week.

Bianca Botes, corporate treasury manager at Peregrine Treasury Solutions, noted that Chinese data is a cause of concern for global growth prospects in the long term. Chinese exports dropped 4% year-on-year.

"The largest contributor to the EU, Germany, also indicates a significant slowdown in its economy. Initial jobless claims indicate a strong jobs market in the US, outperforming market expectations at 213k vs 216k," she commented.

"The key focus area in the market remains the US, with the shutdown still casting a shadow over an already tarnished President Trump.

"We also keep in mind the US-China trade dynamic, as data indicates a massive withdrawal of Chinese investments from the US while investment by the Chinese into the US has plummeted by 92%."

Reserve Bank mandate is enshrined in the Constitution - Kganyago
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