DAILY MARKET UPDATE - 02 JULY 2019 | Merchant West

DAILY MARKET UPDATE - 02 JULY 2019

capital markets

Merchant West Capital Markets

USD/ZAR 14.1857 | EUR/ZAR 16.0132 | GBP/ZAR 17.9047

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email: treasury@merchantwest.co.za

Market Data:

02 July - EC: PPI (y/y) | US: Fed's Williams Speaks on Global Economic and Policy

03 July - SA: Standard Bank South Africa PMI | SACCI Business Confidence | US: MBA Mortgage Applications | Trade Balance | Initial Jobless Claims | Markit US Services PMI

04 July - EC: ECB Chief Economist Lane Speaks in Frankfurt | Retail Sales (y/y) | SA: Electricity Production (y/y) | Electricity Consumption (y/y)

05 July - SA: Gross Reserves | Net Reserves | US - Change in Nonfarm Payrolls

Market Commentary:

South Africa's rand was little changed early on Tuesday, struggling for momentum as investors awaited local and offshore developments before making any big bets as last week's risk-on sentiment faded. At 09hoo the rand was 0.02% firmer at 14.1375 per dollar. The rand had gained strongly in the previous month along with other emerging assets as the greenback slumped over the likelihood of lower U.S. lending rates, but the dollar has bounced back.

"Although the rand has continued to trade steadily over the most recent sessions, it has as yet failed to breach sub-14.0000, and with little by way of local news to provide support, it has retreated from its best levels," analysts at Nedbank said. "The markets remain at the mercy of any headlines regarding the resumption of trade talks between the U.S. and China," the analysts said in a note. President Donald Trump said on Monday that trade talks with China were under way and any deal would need to be somewhat tilted in favor of the United States. Trump and Chinese President Xi Jinping agreed in a meeting on Saturday at a Group of 20 summit in Japan to restart trade talks after the last major round of negotiations collapsed in May. Trump told reporters on Monday that U.S. and Chinese negotiators were "speaking very much on phone but they are also meeting. It essentially has already begun." "I think we have a good chance of making a deal," Trump said. He said he expected China's negotiating position to move closer to Washington's. Talks broke down in May after the United States accused China of backtracking on reform pledges. Trump said China has had a "big advantage" over the United States in trade for "many years." "So obviously you can't make a 50-50 deal. It has to be a deal that is somewhat tilted to our advantage," Trump said.

International dada front - U.S. manufacturing activity slowed to near a three-year low in June, with a measure of new orders received by factories tumbling, amid growing anxiety over an escalation in trade tensions between the United States and China. Other data on Monday showed construction spending unexpectedly fell in May as investment in private construction projects dropped to its lowest level in nearly 2-1/2 years. The reports were the latest indications that economic growth slowed in the second quarter after getting a temporary boost from exports and an accumulation of inventory.

While the slowdown in factory activity was not as steep as had been flagged by some regional factory surveys, a sharp drop in a gauge of prices paid by manufacturers could be yet another reason for the Federal Reserve to consider cutting interest rates this month. The U.S. central bank last month signaled it could ease monetary policy as early as this month, citing low inflation as well as growing risks to the economy from U.S.-China trade tensions. “Manufacturing is clearly taking it on the chin from the rising trade uncertainty," said Chris Rupkey, chief economist at MUFG in New York. The Institute for Supply Management (ISM) said its index of national factory activity dropped to 51.7 last month, the lowest reading since October 2016, from 52.1 in May. It was the third straight monthly decline in the index. A reading above 50 indicates expansion in the manufacturing sector, which accounts for about 12 percent of the U.S. economy. Economists polled by Reuters had forecast the ISM index would fall to 51.0 in June. The ISM said businesses "expressed concern about U.S.-China trade turbulence." They were also spooked by potential tariffs on Mexican imports, which were averted at the eleventh hour.

*Information from Reuters.com

Range for the day: 14.05 - 14.25

Interesting read - The High Court in Johannesburg has ruled that  is illegal for banks to transfer your money – without your permission - to repay debts on other accounts you hold with the same bank. This means that your bank may not move money from your cheque or savings accounts to your credit card, bond or vehicle loan without your permission. This puts an end to the practice where banks transferred money from positive balances to accounts which have fallen behind. The National Credit Regulator (NCR) brought a case against Standard Bank to confirm that the so-called “set-off” rule does not apply to credit agreements. The set-off rule in common law is applied when two persons owe each other and the debts are settled by setting the debts off against each other. “The NCR welcomes this judgment as it protects consumers from financial difficulties caused by the arbitrary transfer of funds from their accounts by banks”, says Nomsa Motshegare, Chief Executive Officer of the NCR. “Banks should obtain permission from consumers before transferring funds from consumers’ accounts to pay amounts due under credit agreements”, Motshegare added.