Markets WRAP: Rand closes at R13.93/$
OVERVIEW: US stock futures and European equities advanced Tuesday as investors awaited developments on trade talks between the world’s largest economies.
Asian shares were mixed as a rebounding dollar put pressure on emerging markets. Futures on the Dow, Nasdaq and S&P 500 all pointed to solid gains at the open after the US expressed optimism that it could reach a “reasonable” deal with China in on-going trade negotiations.
Retailers and real estate companies were among the biggest gainers in the Stoxx Europe 600 Index, which shrugged off unexpectedly weak German industrial production numbers and worsening euro-area consumer confidence to advance.
The euro stayed lower after the data.
In Asia, Japanese shares and Hong Kong stocks closed higher, though equities slid in South Korea. Treasuries held steady and European bonds fell.
Oil traded near $49 a barrel in New York. While the year got off to an optimistic start following solid US employment data and signs the Federal Reserve is turning more dovish, there are still plenty of risks to unsettle investors.
The outcome of US-China trade negotiations hangs in the balance, while American lawmakers have been unable to reach agreement on a budget, leaving parts of the federal government shut down for a third week.
And in Europe, machinations over Brexit continue.“Investors are happy to go with the positive trend in the current environment but remain wary of sharp downside reactions given the moves we’ve seen over the last few weeks and months,” Nick Twidale, chief operating officer at Rakuten Securities Australia, wrote in a note. “Traders are still very much aware that the various geopolitical factors that have been so prevalent in influencing market moves over the last 12 months are still relevant.” - Bloomberg
The rand broke through R14/$ at midday, after earlier reaching an intraday high of R13.86 to the greenback.
The local currency opened the day's trade at R13.87 and was trading at R14.03/$ at 12:12, down 1.13%.
The JSE All Share was marginally higher (+0.13%) while the JSE Top-40 was up +0.31%, with Richemont up +2.6%.
The rand has continued to struggle to maintain momentum below R13.90/$ on Tuesday morning, trading at R13.95 to the greenback by 10:52.
Bianca Botes, Corporate Treasury Manager at Peregrine Treasury Solutions said in a morning note to clients that the rand touched R13.87 briefly on Monday evening.
"The loss of momentum in risk appetite indicates that, while the market is expecting a dovish Fed, investors remain realistic that a rate cut, or anticipation of a future rate cut, is premature and overly optimistic for emerging markets despite the dovish tone," she said.
"Local vehicle sales, European confidence data and US trade balance and job opening figures will all weigh in today, making for a bumpy ride. The delegation from the US currently in Beijing to negotiate a trade deal indicated it is confident a deal that both nations can live with will be reached, easing some of the trade war pressure. We expect a range of R13.82/$ to R14.00/$ today."
Meanwhile Andre Botha, senior currency dealer at TreasuryONE also said the rand was starting to run out of steam.
"We have seen the US dollar slip against all major currencies and it looked like (it would) break above the 1.1500 level against the euro.
"There is also a sense of optimism in the air regarding the US-China trade talks as the equity markets in the US and Asia traded in the green yesterday. Today it looks like the momentum of the past couple of days will continue, but one senses that it is running out of a little bit of steam, which would suggest that the rand might be somewhat range bound today.
"Further momentum could be had tomorrow after the release of the US Fed minutes should the extent of the Fed dovishness be larger than expected.”
TreasuryONE said in a morning note to clients that the dollar was unchanged from yesterday's close but that it remains under pressure as markets await the outcome of the US China trade talks and the US Government shut down weighs on the currency.
"The Euro is at 1.1440 while the rand is at 13.9400. Wall Street closed higher on optimism that there will be progress on a trade deal and the possibility of the Fed pausing on the rate hikes boost the equity markets.
"Elsewhere, the Brexit debate continues with the Parliamentary vote now set for January 15. Tomorrow we see the release of the minutes of the December Fed policy meeting which could give further clarity on the Fed’s outlook which could give markets renewed impetus.
"Gold is holding steady at $1 283.25 while Oil is at $57.44."
Most Asian markets rise as optimism returns, eyes on trade talks
Asian markets mostly rose Tuesday with a little more optimism in the air than in recent weeks as China and the US hold trade talks and the Federal Reserve flags a more dovish stance.
Wall Street provided another positive lead, extending Friday's surge, with Chinese monetary easing at the weekend adding to the buying sentiment.
Focus is now on Beijing, where Chinese and American officials were holding a second day of discussions aimed at resolving their almost year-old trade row.Continue reading
Samsung Electronics flags near-30% slump in Q4 operating profit
Samsung Electronics on Tuesday flagged its first quarterly profit drop in two years and painted a grim outlook owing to mounting competition from Chinese smartphone makers and declining chip prices.
The shock warning added to concerns about the broader tech sector after Apple sent shudders through world markets last week by slashing its revenue forecast blaming weak sales in China and citing the trade war.
Samsung - the world's top maker of smartphones and memory chips - has enjoyed record profits in recent years despite a series of setbacks, including a humiliating recall and the jailing of its de facto chief.Continue reading