Markets WRAP: Rand closes at R13.75/$

The rand closed stronger on Thursday at R13.75/$. 

Here's your Thursday wrap: 

USDZAR 13.7569

EURUSD 1.1379

EURZAR 15.6448

GBPUSD 1.3053

GBPZAR 17.9463

AUDZAR 9.7708

CADZAR 10.3104

CNYZAR 2.0238

ZARJPY 7.9535

CHFZAR 13.8358

R186 8.79%

US 10 Year 2.71%

JSE -0.67%

FTSE -0.41%

S&P 500 0.05%

Gold 1 283.77 

Plat 797.50 

Plad 1 321.50 

Rhod 2 485.00 

Irid 1 470.00 

Ruth 268.00 

Copp 5 885.00 

Brent 60.96 

Gold ZAR 17 651.84 

Plat ZAR 10 965.63 

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US jobless claims fall - Bloomberg 

Filings for US unemployment benefits fell last week to the lowest level since 1969, signaling the labour market remains tight despite the partial federal-government shutdown.

Jobless claims declined 13 000 to 199 000 in the week ended January 19, bucking economist forecasts for an increase, Labour Department figures showed Thursday.

The four-week average, a less-volatile measure, decreased to 215 000, the lowest since early November.

Key insights

The surprise drop indicates how reluctant employers are to fire workers, with the strength overshadowing the shutdown affecting one-quarter of the government.

In any case, the closure is seen reducing economic growth the longer it drags on. Initial filings by federal employees jumped by about 15 000 to 25 419 on an unadjusted basis in the week ended January 12, reflecting the third week of the shutdown that’s caused pay to halt for hundreds of thousands of workers.

Those figures aren't included in the headline claims number, which reflects state unemployment-insurance programs.

Analysts caution that it may take more time for the shutdown to be fully reflected in the report, and data on federal employees are reported with a lag.

Oil slides 

Oil fell as a darkening outlook for the global economy offset the risk of American sanctions on OPEC member Venezuela’s crude.

March futures in New York dropped 0.9%, extending Wednesday’s decline. Germany’s industrial slump worsened at the start of 2019, while an extended shutdown of the US government could wipe out the country’s economic growth in the first quarter.

The White House recognised Juan Guaido as the interim president of Venezuela on Wednesday, a move that carries the risk of further disruption to the nation’s oil exports.

The rand firmed marginally against the dollar on Thursday afternoon to trade at R13.79 to the greenback by 15:00. 

It opened the day at R13.81/$. 

The JSE All-Share index, meanwhile, was down 0.65%, with falls for Industrials and Resources, while Financials showed modest gains. 

Tiger Brands announced on Thursday that it it had accepted a conditional but binding offer to sell 8 000 000 shares in Oceana to Brimstone Investment Corporation, at a purchase price of R581m. 

This represents approximately 5.9% of Oceana’s total shares currently in issue. 

Tiger brands said this would result in a capital profit of approximately R282m.

"The effective date of the Transaction will be the first business day after the date of fulfilment of the last condition precedent. The conditions precedent are required to be fulfilled by no later than 17:00 on 28 February 2019," the group said. 

Vodacom's share price slumped by over 7% on Thursday morning, after a trading update showed the company's South African service revenue declined for the quarter ended December 31.

At 10:00 on Thursday, shares in the mobile operator were trading at R120.54.  A stronger performance by Vodacom's international operations helped offset the slowdown in SA to some extent. 

Consumers fairly optimistic about the future – index

Consumers are fairly optimistic that the outlook of the SA economy and their household finances will improve over the next 12 months, the FNB/BER Consumer Index revealed.

The index for the fourth quarter of 2018, released on Thursday, held steady at +7. The index had fallen sharply from +22 reported in the second quarter to +7 in the third quarter.

"Consumer sentiment settled at a much lower level during the second half of 2018 compared to the extraordinarily positive numbers booked at the height of Ramaphoria (between +22 and +26 in the first half of 2018)," FNB Chief Economist Mamello Matikinca-Ngwenya noted in the report.

The latest reading of +7 is still above the long-run average reading of +2, since 1994. "Consumer confidence remains far higher compared to the depressed levels recorded between 2015 and 2017," she said.    

Prolonged shutdown risks fading appeal of dollar, treasuries

The US government shutdown risks putting a dent in both the dollar and treasuries if it drags on.

A quick resolution could do the same.A drawn-out spending battle may collide with the looming debate over America’s borrowing limit, potentially raising the odds of a US credit rating downgrade, as occurred in 2011.

But some observers reckon the market reaction this time around would be different: Instead of driving a haven trade into treasuries, concerns about the US’s growing debt burden could reverse that flow, pushing sovereign yields higher and the dollar lower.

And the consequences of a near-term fix may be much the same, if it enables even more federal spending.

International operations help buoy Vodacom's performance in Q1

A strong performance in Vodacom's international operations helped offset a slowdown in SA, CEO Shameel Joosub said in the group's trading update.

The mobile operator on Thursday released its trading update for the first quarter of the financial year ending December 31 2018.

It showed that group revenue increased 1.5% to R23bn. Service revenue increased 2.4% to R18.9bn and group data revenue increased 2.2% to R6.8bn. SA service revenue declined 0.9% to R13.9bn as a result of customers making use of promotional data bundle allocations as well as pricing transformation implemented by the mobile operator.

"These efforts have impacted data revenue growth, as it did not yield the expected elasticity given a tougher than anticipated consumer spending environment," Joosub said.

"However, our proactive efforts to keep customers in-bundle have reduced our future exposure to out of bundle revenues," he added.

In contrast, international service revenue increased 13.2% to R5.2bn. Joosub attributes this to "sustained data revenue growth" as well as Vodacom's offering M-Pesa.

"Our International portfolio (excluding Safaricom) now contributes 27.5% to overall Group service revenue. The significant increase in customers in the quarter and strong commercial execution contributed to data revenue growth of 25.4% and to the 30.3% growth produced by M-Pesa," he said.

In the period ahead, Vodacom will be implementing the End-User Subscriber Service Charter regulations from March 1.

The Independent Communications Authority of South Africa had published the final amendments to the charter on April 30, 2018. The charter aims to address consumer concerns on out-of-bundle charges and data bundle expiry rules. It comes into effect from February 28, 2019.

Vodacom noted that the charter "drag on" data revenue growth in the short term.

"However, we are particularly encouraged by the positive momentum on the regulatory front in South Africa following firm commitments by Government and the regulator to stage an auction of '4G spectrum' in the early part of this calendar year, which together with the success of our pricing transformation strategy support the medium term outlook for data revenue growth.

"With an enhanced M-Pesa platform and high speed 4G now available in all our International markets, we expect the solid performance in these operations to continue gaining momentum," the group said.

Asian markets mixed as investors track trade talks, shutdown

Asian investors trod cautiously Thursday as they try to ascertain the state of play in the China-US trade row, while the pound edged higher on growing optimism Britain will not crash out of the European Union.

The long-running US government shutdown continued to rankle, with Democrats and Donald Trump digging their heels in over the president's border wall budget demand, while a White House official warned it could hammer the world's top economy.

For a second day equities swung to and fro, with few solid catalysts to drive trade, though Wall Street provided a positive lead as all three main indexes ended higher following upbeat earnings from the likes of market titans Procter & Gamble and IBM.

Rand makes gains as US shutdown takes a toll on the dollar

The rand started the day at R13.81 to the greenback, which is taking a beating from the ongoing US government shutdown.

"The US government shut down is taking its toll on the dollar, while poor new home sales data in the US has also contributed to a loss of momentum for the greenback," Bianca Botes, corporate treasury manager at Peregrine Treasury Solutions noted in a market update.

"After reaching a low of R13.96/$ yesterday, the rand managed to make up some lost ground against the greenback overnight to open on a steady footing of R13.83 this morning," she said.

The rand's expected range of trade is between R13.80 and R13.94.

The interest rate decision by the European central Bank, and jobless claims from the US are due for release on Thursday.

RECAP: JSE closes weaker as index heavyweights remain subdued

The JSE closed weaker on Wednesday as blue chips weighed down on the index.

On the brighter side, South African inflation for December slowed down significantly due the decrease recorded in fuel prices in that month. According to Statistics SA, CPI YoY for December slowed down to 4.5% from a prior recording of 5.2%, while CPI MoM was recorded at -0.2% compared to the previous reading of 0.2%.