DAILY COMMENTARY - 7 MAY 2019

Merchant West Business Finance

Merchant West Capital Markets

USD/ZAR 14.4661 | EUR/ZAR 16.2195 | GBP/ZAR 18.9733

Please feel free to contact us on the details below:

JHB: (011) 305-9500 | PTA (012) 742-8600 | CPT (021) 552-7007 

email: treasury@merchantwest.co.za

Market Data:

7 May - No Data of significant importance 

8 May - SA Public Holiday

9 May - CN Chinese CPI & PPU Data | SA - Mining Production & Manufacturing data | US - PPI Final Demand | Trade Balance 

10 May - GB UK GDP, Manufacturing Prod & Trade Balance | US CPI Data

Market Commentary:

After months of speculation, debate and campaigning – the National Elections will take place tomorrow with investors looking on for any signs for reforms based on the margin of victory for the current ruling party and sitting president. Consensus is that President Ramaphosa will need a strong showing for the ANC at the polls tomorrow in order to enforce his reformist agenda that will likely assist in stabilising a fragile economy and restoring investor confidence in the medium term. Results are expected to be finalised by the weekend. We are anticipating markets to largely sit out till there is some sort of direction which leaves ZAR assets open to two-way risks in anxious trading sessions. We head into tomorrow a touch below the 14.50 handle and can expect to remain range bound in choppy trade with international developments (Trade Wars, Turkish election re-runs) leading EM. With a snap of a finger – ZAR could be back towards the 14.00 mark (currently priced in at a 43% probability in the next one-month period) should the ANC achieve closer to a 60% winning margin (BNP Paribas).

Asian shares staggered up from five-week lows on Tuesday but remained fragile after U.S. President Donald Trump’s latest threat to raise tariffs on Chinese goods shocked financial markets and fuelled worries that trade talks may be derailed. MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.1 percent, erasing earlier losses. It tumbled 2 percent on Monday after Trump unexpectedly jacked up pressure on Beijing in the midst of trade negotiations. Chinese shares staged a mild technical rebound but stayed choppy after their worst drop in more than three years on Monday. The benchmark Shanghai Composite was 0.5 percent higher, while the blue-chip CSI 300 rose 0.7 percent and Hong Kong’s Hang Seng was up 0.3 percent. Japan’s Nikkei shed 1.5 percent, taking a delayed hit as the country’s financial markets opened on Tuesday after a 10-day break to mark the ascension of a new emperor. Yasuo Sakuma, chief investment officer at Libra Investments in Tokyo, believed stocks have entered a new downtrend as investors had growing doubts over whether the United States and China would cut a deal on trade any time soon. “Investors had been too complacent since the beginning of this year. Now it’s time for ‘sell in May and go away,’” he said (Reuters.com).

China’s Yuan weakened further against the dollar on Tuesday, but the pace of losses slowed, as investors largely digested Trump’s tariff threats and started to seek clues for reaction from Beijing. The offshore yuan slipped 0.3 percent to 6.7939 per dollar while the onshore yuan also fell 0.3 percent to 6.7789 per dollar. Australia’s dollar became the biggest mover among the major currencies, strengthening as much as 0.9 percent to a one-week top of $0.7048, after the country central bank’s decision to hold rates wrong-footed some who had expected a cut. There had been some speculation it would ease policy given recent weak inflation. Other major currencies remained confined to well-trodden ranges on Tuesday, with the euro trading virtually flat at $1.1212 and the dollar holding steady at 110.63 yen . In the commodity market, oil futures traded steady to higher on Tuesday as U.S. sanctions on crude exporters Iran and Venezuela kept supply concerns alive. U.S. West Texas Intermediate (WTI) crude futures inched up to $62.34 per barrel while Brent crude oil futures were little changed at $71.23 (Reuters.com).                 

Range for the day:  14.35 – 14.65