• The market focus has shifted back to Greece and the country’s request for a loan extension. A solution still seems a long way off.

  • On the back of rising uncertainty in the Eurozone, the rand gave back most of its gains against the dollar in the wake of the FOMC minutes two days ago.

  • The rand is trading firmly above 11.60 yet again but still well within the 11.40 – 11.75 range.

  • The focus over the next few days is likely to shift back to the manufacturing sector as we await the flash manufacturing PMIs for February for various countries.

  • On the domestic front, we have a quiet day today. Of course, next week the focus will be on the Budget. Overall, we expect few surprises in the Budget, with the focus on the consolidation of fiscal metrics.

  • Our mid-point for the rand in Q1:15 remains at 11.50.

  • Resistance for the rand is at 11.5834 – the 50 day MA. Should the rand move below this level, we would eye the 11.5800 – 11.400 range. Resistance is at 11.7500 and 11.8500.


International developments

The market focus has shifted back to Greece and the country’s request for a loan extension which is aimed at providing the country with more time to negotiate a successful conclusion to Greece’s current debt programme. The request for a loan extension was met with fierce resistance, especially from Germany. A solution still seems a long way off.

On the back of rising uncertainty in the Eurozone, the rand gave back most of its gains against the dollar after the FOMC minutes of two days ago. The rand is trading firmly above 11.60 yet again but still well within the 11.40 – 11.75 range. Support remains at 11.58 – the rand’s 50-day MA.

The international data calendar quiet today. The focus over the next few days is likely to shift back to the manufacturing sector as we await the flash manufacturing PMIs for February for various countries. Already this morning, Japan’s flash PMI declined form 52.2 in January to 51.5 in February, signalling a manufacturing sector that is still expanding but at a slower pace than seen late last year. The US flash PMI is also expected to slow in January. In China, the manufacturing sector is expected to show another month of contraction for February. However, we may well see a rebound in March. February sees most of the country going on leave for longer than a week around the Chinese New Year holidays which kicked of this week. Nevertheless, a weaker global manufacturing sector is generally rand-negative.


Domestic developments

On the domestic front, we have a quiet day today. Of course, next week the focus will be on the Budget. Overall, we expect few surprises in the Budget, with the focus on the consolidation of fiscal metrics.

Finance Minister Nhlanhla Nene will present the 2015/16 Budget on Wednesday 25 February. We see this Budget as being of key importance to investors and rating agencies, particularly after the expenditure tightening that was announced in the MTBPS in October 2014.

As at end December, the Budget deficit was 11.32% wider than at the same time in 2013/14. With three months to go until the end of the fiscal year, we think that the 2014/15 Budget balance is likely to be between -4.05% and -4.12% of GDP. This suggests that the risk to a worse-than-forecast deficit, for at least 2014/15, seems low. For more detail on our thoughts around the Budget, see our Fixed Income Weekly from 6 February.


Markets

The rand weakened on Thursday, closing at 11.68, compared to Wednesday’s close of 11.60. The rand’s depreciation occurred in line with dollar strength against all of the majors; the dollar strengthened against the euro (0.3%) and 0.1% against the pound and the yen. The rand weakened against all of the major crosses; the dollar (-0.7%), the yen (-0.6%), the pound (-0.5%) and the euro (-0.4%). The rand put in the second-worst performance amongst the commodity currencies, only ahead of the NOK, and the third-worst performance against the EMs (behind the MXN and BRL). The rand traded between a low of USDZAR11.5460 and a high of USDZAR11.6879 intraday.

Commodities were mixed on Thursday. Gold and platinum were down on the day, by 0.5% and 0.3% respectively, while copper was up marginally by 0.1%. Brent was down by 0.5% on the day to close at $60.21/bbl. Both the developed market MSCI and the MSCI EM were up on Thursday. The ALSI increased by 0.5% on Thursday. Non-residents were net sellers of equities (-ZAR1 759 million) on the day. The EMBI narrowed by 4 bps on Thursday while the SA’s 5yr CDS spread narrowed by 2 bps on the day. The CBOE VIX Index, a volatility-based proxy for global risk appetite/aversion, decreased by 1.0% on Thursday.


Latest SA publications

SA Macroeconomics: Economics Note: Retail sales grew 3.4% y/y, in December and 2.4% in 2014: Festive season saw food, pharma, clothing & furniture outperform by Kim Silberman, Thanda Sithole and Kuvasha Naidoo (18 February 2015)

SA Macroeconomics: Economics Note: CPI falls to 4.4% y/y, core rises: Food surprises to the downside by Kim Silberman, Thanda Sithole and Kuvasha Naidoo (18 February 2015)

SA Fixed Income ALBI note: ALBI modified duration moves longer in March by Asher Lipson (17 February 2015)

SA FX Weekly: Risk aversion alive and kicking by Marc Ground and Shireen Darmalingam (16 February 2015)

SA Macroeconomics: Weekly Data Preview: Jan CPI expected to fall to 4.6%: Dec retail sales may surprise to the upside by Kim Silberman, Thanda Sithole and Kuvasha Naidoo (16 February 2015)

Credit & Securitisation Weekly: Eskom at top of government’s agenda by Steffen Kriel and Varushka Singh (13 February 2015)

SA Macroeconomics: Economics Note: December manufacturing up 1.1%y/y, driven by food: Manufacturing grows 0.5 in 2014 by Kim Silberman, Thanda Sithole and Kuvasha Naidoo (10 February 2015)

SA Macroeconomics: Economics Note: The lower oil price: Part 2: Impact on the current account deficit by Kim Silberman, Thanda Sithole and Kuvasha Naidoo (9 February 2015)

SA Macroeconomics: Weekly Data Preview: Mining underperforms, while manufacturing outlook improves: Asian monetary policy easing by Kim Silberman, Thanda Sithole and Kuvasha Naidoo (9 February 2015)

SA Fixed Income Weekly: Markets looking ahead to the Budget by Asher Lipson (6 February 2015)

Credit & Securitisation Monthly: 2015 forecasts by Steffen Kriel and Varushka Singh (6 February 2015)

SA Macroeconomics: Economics Note: The lower oil price: PART 1: Impact on the consumer by Kim Silberman, Thanda Sithole and Kuvasha Naidoo (29 January 2015)

SA FIC Thematic: Ratings matter; a quantitative approach by Walter de Wet, Asher Lipson and Shireen Darmalingam (21 January 2015)

Certification

The analyst(s) who prepared this research report (denoted by an asterisk*) hereby certifies(y) that: (i) all of the views and opinions expressed in this research report accurately reflect the research analyst's(s') personal views about the subject investment(s) and issuer(s) and (ii) no part of the analyst’s(s’) compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed by the analyst(s) in this research report.

Conflict of Interest

It is the policy of The Standard Bank Group Limited and its worldwide affiliates and subsidiaries (together the “Standard Bank Group”) that research analysts may not be involved in activities in a way that suggests that he or she is representing the interests of any member of the Standard Bank Group or its clients if this is reasonably likely to appear to be inconsistent with providing independent investment research. In addition research analysts’ reporting lines are structured so as to avoid any conflict of interests. For example, research analysts cannot be subject to the supervision or control of anyone in the Standard Bank Group’s investment banking or sales and trading departments. However, such sales and trading departments may trade, as principal, on the basis of the research analyst’s published research. Therefore, the proprietary interests of those sales and trading departments may conflict with your interests.

Legal Entities

To U. S. Residents

Standard New York Securities, Inc. is registered with the Securities and Exchange Commission as a broker-dealer and is also a member of the FINRA and SIPC. Standard Americas, Inc is registered as a commodity trading advisor and a commodity pool operator with the CFTC and is also a member of the NFA. Both are affiliates of Standard Bank Plc and Standard Bank of South Africa. Standard New York Securities, Inc is responsible for the dissemination of this research report in the United States. Any recipient of this research in the United States wishing to effect a transaction in any security mentioned herein should do so by contacting Standard New York Securities, Inc.

To South African Residents

The Standard Bank of South Africa Limited (Reg.No.1962/000738/06) is regulated by the South African Reserve Bank and is an Authorised Financial Services Provider.

To U.K. Residents

Standard Bank Plc is authorised and regulated by the Financial Services Authority (register number 124823) and is an affiliate of Standard Bank of South Africa. The information contained herein does not apply to, and should not be relied upon by, retail customers.

To Turkey Residents

Standard Unlu Menkul Degerler A.S. and Standard Unlu Portfoy Yonetimi A.S. are regulated by the Turkish Capital Markets Board (“CMB”). Under the CMB’s legislation, the information, comments and recommendations contained in this report fall outside of the definition of investment advisory services. Investment advisory services are provided under an investment advisory agreement between a client and a brokerage house, a portfolio management company, a bank that does not accept deposits or other capital markets professionals. The comments and recommendations contained in this report are based on the personal opinions of the authors. These opinions might not be appropriate for your financial situation and risk and return preferences. For that reason, investment decisions that rely solely on the information contained in this presentation might not meet your expectations. You should pay necessary discernment, attention and care in order not to experience losses.

To Singapore Residents

Singapore recipients should contact a Singapore financial adviser for any matters arising from this research report.

Important Regional Disclosures

The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company(ies) within the past 12 months.

Principal is not guaranteed in the case of equities because equity prices are variable.

Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.

To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors:

The non-U.S. research analysts (denoted by an asterisk*) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts (denoted by an asterisk*) may not be associated persons of Standard New York Securities Inc. and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. Each analyst (denoted by an asterisk*) is a Non-U.S. Analyst. The analyst is a research analyst employed by The Standard Bank Group Limited.

General

This research report is based on information from sources that Standard Bank Group believes to be reliable. Whilst every care has been taken in preparing this document, no research analyst or member of the Standard Bank Group gives any representation, warranty or undertaking and accepts no responsibility or liability as to the accuracy or completeness of the information set out in this document (except with respect to any disclosures relative to members of the Standard Bank Group and the research analyst’s involvement with any issuer referred to above). All views, opinions and estimates contained in this document may be changed after publication at any time without notice. Past performance is not indicative of future results. The investments and strategies discussed here may not be suitable for all investors or any particular class of investors; if you have any doubts you should consult your investment advisor. The investments discussed may fluctuate in price or value. Changes in rates of exchange may have an adverse effect on the value of investments. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Members of Standard Bank Group may act as placement agent, advisor or lender, make a market in, or may have been a manager or a co-manager of, the most recent public offering in respect of any investments or issuers referenced in this report. Members of the Standard Bank Group and/or their respective directors and employees may own the investments of any of the issuers discussed herein and may sell them to or buy them from customers on a principal basis. This report is intended solely for clients and prospective clients of members of the Standard Bank Group and is not intended for, and may not be relied on by, retail customers or persons to whom this report may not be provided by law. This report is for information purposes only and may not be reproduced or distributed to any other person without the prior consent of a member of the Standard Bank Group. Unauthorised use or disclosure of this document is strictly prohibited. By accepting this document, you agree to be bound by the foregoing limitations. Copyright 2011 Standard Bank Group. All rights reserved.

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD clings to modest gains above 1.0650 ahead of US data

EUR/USD clings to modest gains above 1.0650 ahead of US data

EUR/USD trades modestly higher on the day above 1.0650 in the early American session on Tuesday. The upbeat PMI reports from the Eurozone and Germany support the Euro as market focus shift to US PMI data.

EUR/USD News

GBP/USD extends rebound, tests 1.2400

GBP/USD extends rebound, tests 1.2400

GBP/USD preserves its recovery momentum and trades near 1.2400 in the second half of the day on Tuesday. The data from the UK showed that the private sector continued to grow at an accelerating pace in April, helping Pound Sterling gather strength against its rivals.

GBP/USD News

Gold flirts with $2,300 amid receding safe-haven demand

Gold flirts with $2,300 amid receding safe-haven demand

Gold (XAU/USD) remains under heavy selling pressure for the second straight day on Tuesday and languishes near its lowest level in over two weeks, around the $2,300 mark in the European session. Eyes on US PMI data. 

Gold News

Here’s why Ondo price hit new ATH amid bearish market outlook Premium

Here’s why Ondo price hit new ATH amid bearish market outlook

Ondo price shows no signs of slowing down after setting up an all-time high (ATH) at $1.05 on March 31. This development is likely to be followed by a correction and ATH but not necessarily in that order.

Read more

US S&P Global PMIs Preview: Economic expansion set to keep momentum in April

US S&P Global PMIs Preview: Economic expansion set to keep momentum in April

S&P Global Manufacturing PMI and Services PMI are both expected to come in at 52 in April’s flash estimate, highlighting an ongoing expansion in the private sector’s economic activity.

Read more

Majors

Cryptocurrencies

Signatures