DAILY MARKET UPDATE - 11 JUNE 2019

markets commentary

Merchant West Capital Markets

USD/ZAR 14.7324 | EUR/ZAR 16.6850 | GBP/ZAR 18.6803

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:

11 June - SA: Manufacturing Prod NSA (y/y) | Manufacturing Prod SA (m/m) | US: PPI Final Demand (y/y)

12 June - EU: ECB President Draghi Speaks in Frankfurt | SA: Retail Sales Constant (y/y) | Retail Sales (m/m) | US: CPI (y/y) | Monthly Budget Statement

13 June - SA: Mining Production y/y & m/m | Gold Production y/y | Platinum Production | BER Business Confidence

14 June - US: Retail Sales Advance | Industrial Production | Manufacturing (SIC) Production  

Market Commentary:

South Africa's rand started the week firmer against the dollar, recovering some ground on Monday after steep losses last week although a number of economic data releases in the coming days could knock it back off track. The rand's gains were mostly driven by global factors, including the United States' decision to shelve plans to impose tariffs on Mexico and rising chances that the next U.S. interest rate move will be a cut given lacklustre jobs data last week.At 17h00, the rand traded at 14.7950 versus the dollar, around 1.17 percent stronger than its previous close. Global factors also boosted emerging market equities, to their highest point in nearly four weeks on Monday. However, local factors could again pull the rand back again in the next few days. After last week's news that the South African economy contracted by over 3% in the first quarter, investors are now turning their attention to data releases on manufacturing, retail sales and business confidence to further gauge the economy's health, Lukman Otunuga, research analyst at FXTM, said in a note. "Should the pending reports fail to meet market expectations, the rand which is already tussling with domestic headwinds, may find itself exposed to downside risks," the note said. The rand slumped last week following news of the economic contraction and also amid a row over the central bank's mandate, which rattled investors. Government bonds were flat, with the yield on the benchmark 2026 instrument ZAR186= at 8.415 percent.

International trading front -  U.S. President Donald Trump said on Monday he was ready to impose another round of punitive tariffs on Chinese imports if he cannot make progress in trade talks with China's President at a Group of 20 summit later this month. Since two days of talks to resolve the U.S.-China trade dispute last month in Washington ended in a stalemate, Trump has repeatedly said he expected to meet President Xi Jinping at the June 28-29 summit in Osaka, Japan. China has not confirmed any such meeting. Trump said last week he would decide after the meeting of the leaders of the world's largest economies whether to carry out a threat to impose tariffs on at least $300 billion in Chinese goods."We are scheduled to talk and to meet. I think interesting things will happen. Let's see what happens," Trump told reporters at the White House. The United States has already imposed 25% tariffs on $250 billion worth of goods. China's foreign ministry said on Monday that China is open to more trade talks with Washington but has nothing to announce about a possible meeting. Tensions between Washington and Beijing rose sharply in May after the Trump administration accused China of having reneged on promises to make structural economic changes during months of trade talks.

The U.S. government has also angered China by putting Huawei Technologies Co Ltd on a blacklist that effectively bans U.S. companies from doing business with the Chinese firm, the world’s biggest telecoms equipment maker. Investors worry China will retaliate by putting U.S. companies on a blacklist or banning exports to the United States of rare earth metals, which are used in products such as memory chips, rechargeable batteries and cell phones. Fitch Ratings said on Monday any such move would be disruptive to the U.S. technology sector and could hurt some Chinese sectors as well, though it added that it was too early to assess potential credit implications. In an interview with CNBC, Trump said the Huawei dispute could be addressed as part of a trade deal with China.

Range for the day: 14.65 – 14.95