Markets WRAP: Rand closes at R14.37/$

The rand closed at R14.37 to the greenback on Monday afternoon. 

The day's range was between R14.33 to R14.53.

TreasuryONE said earlier that emerging market currencies had weakened, led by Turkey's lira and the rand. 

The rand opened at R14.53.

OVERVIEW: US stocks extended losses as traders remained on edge following Friday’s sell-off. Treasuries and the dollar steadied. Technology and energy shares led declines in the S&P 500 Index, and a rebound in banks fizzled out.

Ten-year Treasury yields traded near 2.44% after a closely-watched part of the US curve inverted on Friday as investors wager the Federal Reserve will need to cut rates.

The greenback dropped against most of its Group-of-10 currency peers. European shares fell even after data showed confidence among German companies improved. The risk rally has come under scrutiny in recent sessions, after stock valuations climbed near levels reached during the height of last year’s euphoria. While weakening data and a pivot by global central banks away from tighter policy is shaking confidence, a breakthrough in US-China trade talks could provide support going forward.

Investors also digested news that Special Counsel Robert Mueller found no evidence anyone close to Donald Trump colluded with Russia in the 2016 presidential campaign.

“It’s mildly positive for risk assets, but only very mildly and not nearly enough to overcome skittishness and downward pressure from continued weakness in global economic data,” said Aaron Hurd, a senior portfolio manager in the currency group at State Street Global Advisors, whose team manages $104 billion. The pound rose at the start of a week that could bring yet another vote on UK Prime Minister Theresa May’s Brexit plan.

Chancellor of the Exchequer Philip Hammond and other cabinet colleagues publicly backed May on Sunday as several British newspapers said she’s under increasing pressure to stand down over her handling of Britain’s exit from the European Union. Elsewhere, the Turkish lira recouped some of its Friday slump, which followed the start of an investigation by the country’s banking regulator into JPMorgan Chase & Co. and another probe of unspecified banks for stoking the currency’s plunge.

Earlier, Asia was in catch-up mode, with stocks tumbling in Tokyo. Australia’s 10-year bond yield recorded an all-time low and Japan’s hit the lowest since September 2016. - Bloomberg

Oil steady after biggest loss in three weeks

Sharon Cho and Grant Smith, Bloomberg

Oil steadied in New York after its biggest loss in three weeks, yet concerns lingered that a slowdown in global economic growth will erode fuel consumption.

West Texas Intermediate futures were little changed near $59 a barrel, after losing 1.6% on Friday.

A closely watched gauge of US Treasuries inverted for the first time since 2007, a signal a recession may be coming in the world’s largest economy.

Some concerns over a new crude glut abated however as drilling rigs in America fell to the lowest in almost a year. Crude has retreated after reaching a four-month high on Thursday as disappointing global economic data and a lack of resolution to the U.S.-China trade war damped sentiment.

The Organisation of the Petroleum Exporting Countries and its allies’ commitment to curb output, coupled with supply disruptions in Venezuela and Iran, is stopping prices from falling further.

“Dark clouds are looming over the global economy in ever-increasing numbers,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd. in London. “Concerns surrounding an economic downturn reared their head last week amid a flurry of negative data.”

The rand is in for a volatile week, according to Senior Dealer at TreasuryONE Andre Botha. 

Botha said this is mostly due to the two big events expected this week - the SA Reserve Bank's interest rate decision on Thursday and Moody's expected credit rating announcement on Friday.

PIC commission to continue as key Ayo repayment court order expected

The judicial commission of inquiry into state-run asset manager the Public Investment Corporation is set to continue Monday while a key court judgement affecting Ayo Technology Solutions will also be handed down.

The North Gauteng High Court heard an urgent interdict last week by Ayo Technology Solutions against the Companies and Intellectual Property Commission.

Stock sell-off roils Asia, yields slide further

Adam Haigh, Bloomberg 

The stock sell-off that gripped markets Friday rolled into Asia Monday, with a gauge of the region’s shares heading for its biggest decline of 2019 and US futures suggesting further losses on Wall Street. Bond yields plumbed fresh lows.

Shares fell more than 2% in Tokyo, the biggest slide since December. Equities were down more than 1% in Hong Kong, Shanghai and Seoul, while European futures were lower.

Australia’s 10-year bond yield recorded an all-time low and Japan’s hit the lowest since September 2016, when the Bank of Japan overhauled policy to focus less on asset purchases.

A closely watched gauge of Treasuries has inverted for the first time since 2007, combining with poor European PMI readings on Friday to deepen recession worries.

The global equity recovery that took benchmarks to a five-month high is now showing signs of cracking amid weakening data and a pivot by global central banks away from monetary normalisation - which itself reflects concerns about the outlook.

The 2019 advance in shares had taken the S&P 500 Index and MSCI World Index near levels reached during the height of last year’s rally.

“Global equities were kind of complacent” as rates markets reflected growth concerns, said Marcella Chow, global market strategist at JPMorgan Asset Management in Hong Kong. “It was the release of global PMI data last Friday that shook off the complacency,” she added.

A breakthrough in U.S.-China trade talks and an eventual turn in economic data could give support for risk assets in time. But meantime, Chow advised dividend-rich equities and high- yield debt for an income-based strategy.

Trump and Brexit 

Investors also digested news that Special Counsel Robert Mueller found no evidence anyone close to President Donald Trump colluded with Russia in the 2016 presidential campaign. While Mueller failed to exonerate Trump on obstruction of justice, Attorney General William Barr said he did not find enough evidence to pursue that charge.

In the UK, sterling dipped at the start of a week that could bring the risk of yet another vote on UK Prime Minister Theresa May’s Brexit plan. Chancellor of the Exchequer Philip Hammond and other cabinet colleagues publicly backed May on Sunday as several British newspapers said she is under increasing pressure to stand down over her handling of Britain’s exit from the European Union.