LOCKDOWN LEVEL 2 [DAY 16]
TOTAL DAYS 160 – 07 HOURS 30 MINUTES
By the close of trade on Tuesday, the South African rand strengthened against the US dollar.
- In South Africa, the Absa purchasing managers’ index (PMI), that measures sentiment in manufacturing, jumped more than forecast in August to its highest level since 2007, as the move to level 2 of the lockdown aided the sector.
- The greenback lost ground, as investors continued to ponder on the US Federal Reserve’s (Fed) willingness to let inflation rise.
- On the data front, the ISM manufacturing activity index accelerated to a nearly two-year high in August, amid a surge in new orders. However, employment continued to lag, supporting views that the labour market recovery was losing momentum. Meanwhile, the Fed Governor, Lael Brainard, stated that the central bank should pivot to provide more support for US economic growth.
- The pace of US job gains over the next decade will slow considerably amid a sharp decline in the active labor force and an aging population, according to Labor Department projections released Tuesday. From the period of 2020-29, the economy is expected to add a net 6 million new jobs, an annual growth rate of just 0.4%, the Bureau of Labor Statistics estimates. That compares with the 1.3% annual rate during the 2009-19 period, which got a boost from the Great Recession recovery that started in mid-2009 and ended up being the longest expansion in U.S. history before it ended in February of this year.
- In an unprecedented move on Tuesday, with Congress unable to reach a common ground on virtually any stimulus extension, the Centers for Disease Control and Prevention unveiled today it would temporarily – at least through the end of 2020 – suspend most rental evictions for Americans struggling to pay rent due to the pandemic, in a step which CNN dubbed was “broader than eviction protections already in place.” The move comes as negotiations on further coronavirus aid have been stalled as Republicans and Democrats refuse to budge on topline numbers for what a new relief package would cost.
- The yield on benchmark government bonds fell yesterday. The yield on 2026 bond dropped to 7.23%. Further, the yield on 2023 bond declined to 4.45%, while that for the longer-dated 2030 issue fell to 9.11%.
In early trade on Wednesday, the US dollar is trading 0.1% lower against the South African rand at R16.646, while the euro is trading 0.1% lower at R19.8079. The British pound has declined 0.1% against the South African rand to trade at R22.2704.
By the close of trade on Tuesday, the euro declined against most of the major currencies.
- Australian workers officially have wage subsidies locked in until next year as new figures confirmed the nation’s first recession in almost three decades. The latest figures from the Australian Bureau of Statistics (ABS), released on Wednesday, show Australian Gross Domestic Product (GDP) fell seven per cent in the June quarter, which is the largest quarterly fall on record. The economy shrank by 6.3 per cent in the year to June, the ABS said. The 7.0 per cent fall was prompted by the global pandemic and associated containment policies.
- The eurozone’s consumer price index (CPI) fell for the first time since May 2016, on an annual basis, raising chances that the European Central Bank will have to inject yet more stimulus to generate price growth which has undershot its target for over seven years.
- British retailers discounted their goods a bit more aggressively in August than in July as they sought to get customers back after the coronavirus lockdown earlier in the year, industry data showed on Wednesday. Average shop prices in August were 1.6% lower than a year before, compared with a fall of 1.3% in July and a record 2.4% tumble in May, the British Retail Consortium said. August’s fall was driven by bigger price declines of 3.4% for non-food prices, compared with a 2.9% drop in July.
- German manufacturing PMI dropped in August.
- New Zealand’s central bank said it’s determined to head off unnecessarily low inflation or even deflation, signaling an intent to continue to loosen monetary policy if required. “Consistently below target inflation has its own unique challenges that are best avoided,” Reserve bank Governor Adrian Orr said in a speech Wednesday.
- India’s central bank has said a stronger currency will help contain imported inflation, signaling it may tolerate gains in the rupee as it tries to curb price pressures in an economy headed for recession. The Reserve Bank of India, which has stayed away from intervening in the currency market in recent days amid lumpy inflows from abroad, went a step ahead on Monday by explaining its viewpoint: “the recent appreciation of the rupee is working towards containing imported inflationary pressures.
In early trade on Wednesday, the euro has marginally slipped against the US dollar to trade at $1.1907, while it has marginally weakened against the British pound to trade at GBP0.8898.