LOCKDOWN LEVEL 3 [DAY 9]
TOTAL DAYS 74 – 07 HOURS 05 MINUTES
By the close of trade on Monday, the South African rand strengthened against the US dollar.
- Hopes of a rapid global economic recovery from the COVID-19 pandemic continued to feed investors risk appetite. On the same day that the Nasdaq marked a new bull market, the U.S. economy was officially declared to be in a recession. The two milestones on Monday illustrate how an 11-week surge in stocks has occurred despite widespread economic devastation fueled by the coronavirus pandemic. Driven higher in recent months by surging technology and communications stocks, the Nasdaq .IXIC closed up 0.8% on Monday at 9,924.75 points, exceeding its previous record high on Feb. 19, just before fears of the coronavirus ended its 11-year bull market.
- However, the World Bank warned that the South African economy will experience its deepest economic contraction in a century this year, with the country’s gross domestic product (GDP) expected to slump by 7.1% on the back of stringent but necessary COVID-19 containment measures.
- In the US, the National Bureau of Economic Research stated that the unprecedented magnitude of the decline in employment and production, and its broad reach across the entire economy, warrants the designation of this episode as a recession, even if it turns out to be briefer than earlier contractions. While Friday’s optimistic jobs news showed the U.S. added 2.5 million jobs in May rather than the loss of 9 million that most experts were expecting, the economy is not yet out of the woods. Here’s what could derail the U.S. recovery. New coronavirus cases: 87% of panelists in the June National Association of Business Economists Outlook Survey said that a second wave of Covid-19 infections was the biggest risk to the economy in 2020.
- The Federal Reserve will probably keep interest rates at zero when it meets this week. But its own ranks are increasingly clamoring for an unprecedented move: sending rates into negative territory. The era of the U.S. dollar’s “exorbitant privilege” as the world’s primary reserve currency is coming to an end many economist believe. Already stressed by the impact of the Covid-19 pandemic, U.S. living standards are about to be squeezed as never before.
- Separately, World Bank expects the US economy to contract by 6.1% before rebounding in 2021.
- The yield on benchmark government bonds rose yesterday. The yield on 2026 bond rose to 7.54%. Further, the yield on 2023 bond advanced to 5.12% while that for the longer-dated 2030 issue rose to 8.99%.
In early trade on Tuesday, the US dollar is trading 0.3% higher against the South African rand at R16.7270, while the euro is trading 0.2% higher at R18.8815. The British pound has gained 0.2% against the South African rand to trade at R21.2739.
By the close of trade on Monday, the euro declined against most of the major currencies.
- Seasonally adjusted German industrial production fell more-than-expected on a monthly basis in April.
- On the flipside, the eurozone’s investor morale improved in June, as the bloc is slowly recovering from a slump following the COVID-19 pandemic.
In early morning trade on Tuesday, the euro has marginally slipped against the US dollar to trade at $1.1289, while it has marginally weakened against the British pound to trade at GBP0.8876.
Below is a link to a very detailed Covid-19 picture giving stats and graphs.