Markets WRAP: Rand closes at R15.41/$
The rand closed at R15.41/$ on Wednesday. Here's what the end of the day brought:
US 10 Year 1.59%
S&P 500 -1.87%
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OVERVIEW: American equity-index futures slumped alongside stocks in Europe as weak data from two of the world’s biggest economies overshadowed an apparent de-escalation in the trade war.
Treasuries and European bonds rallied, with key parts of both the US and UK yield curves inverting. Contracts on the S&P 500 fell alongside the Stoxx Europe 600 index as data showed Germany’s economy contracted in the second quarter.
The yield on 30-year Treasuries dropped to a record and the gap between that of two-year and 10-year debt inverted for the first time since 2007. The UK yield curve inverted for the first time since the financial crisis and the pound strengthened after inflation unexpectedly rose above the Bank of England’s 2% target in July. Asian stocks gained, tracking Tuesday’s move on Wall Street even as Chinese retail sales and industrial output data missed estimates.
The dollar was steady. The inverted yield curves, considered a recession warning signal by many analysts, are spooking investors already seeking shelter from the fraught geopolitical climate and the impact of the global trade war.
The data from China and Germany added to the gloomy outlook for economic growth on Wednesday, souring the mood after President Donald Trump’s decision to delay tariffs on Chinese imports eased some tension.
“This is not a positive sign for the market,” Jonathan Golub, chief US equity strategist at Credit Suisse, said on Bloomberg TV. “The Fed is totally empowered to change this dynamic and the market is saying they have to.
”Meanwhile, Hong Kong’s airport resumed normal operations after a chaotic night of protest in which demonstrators beat and detained two suspected infiltrators and Trump warned of Chinese troops massing on the border. Elsewhere, oil declined after jumping the most since early January. Gold reversed an earlier decline.
Here are the main moves in markets:
Futures on the S&P 500 Index fell 0.9% as of 07:15 New York time. The Stoxx Europe 600 Index decreased 1.1%. The MSCI Asia Pacific Index jumped 0.8%. Germany’s DAX Index decreased 1.5%. The UK’s FTSE 100 Index decreased 1%.
The Bloomberg Dollar Spot Index was little changed. The euro was unchanged at $1.1171. The British pound climbed 0.2% to $1.2087. The Japanese yen climbed 0.6% to 106.14 per dollar.
The yield on 10-year Treasuries decreased eight basis points to 1.62%. The yield on two-year Treasuries fell five basis points to 1.62%. Britain’s 10-year yield declined two basis points to 0.47%. Germany’s 10-year yield declined three basis points to -0.64%.
Gold gained 0.6% to $1,511.08 an ounce. Brent crude fell 1.5% to $60.35 a barrel. - Bloomberg
A move to R15.00 to the greenback may soon be back on the cards for the rand, says Treasury Partner at Peregrine Treasury Solutions Bianca Botes.
The rand was trading at R15.12 at 07:52.
"The market managed to shed some of its jitters as Washington moved to postpone to December the 10% tariff hike on certain Chinese goods that was due to kick in on 1 September," she said.
"The move saw the rand rapidly clawing back some ground against the dollar, to gain around 1%. Chinese industrial production and retail sales data disappointed this morning, coming in weaker than expected. The rest of the day will see UK CPI and EU GDP released.
"We will also turn our attention to retail sales from the local economy this afternoon which are expected to come in at 2.3% year-on-year for June.
"The rand now has the potential to gain some upward momentum but we will be keeping a very close eye on the geopolitical landscape.
"We start the day at R15.13/$, R16.92/€ and R18.25/£. The rand will now test to break below R15.10, after which a move to R15.00 is back on the cards."