By the close of trade on Monday, the South African rand strengthened against the US dollar. Many investors are eyeing the politics surrounding the U.S. elections as a major factor for the market in the coming months. But, the politics of a potential return to national lockdowns in response to the resurgence of COVID-19 cases may be a bigger potential market mover for investors to consider. A widespread return to national lockdowns would likely mean a return to recession for the global economy and a bear market for stocks. The potential for a return to lockdowns appears to be on the rise

  • On the data front, South African producer price index (PPI) rose more-than-expected on an annual basis in August.
  • In the US, the Cleveland Federal Reserve (Fed) Bank President, Loretta Mester, warned that the US economy remained fragile and won’t fully recover until actions are taken to promote a more inclusive economy. Meanwhile, the Dallas Fed manufacturing index advanced in September.
  • Equities kicked off the week with gains on Monday as the Dow Jones Industrial Average rose more than 500 points. At the end of last week, Treasury Secretary Mnuchin and House Speaker Pelosi revived hope for another coronavirus stimulus package. We didn’t see any new developments Monday but stocks leaped higher on the possibility of a new deal and reports that President Trump will announce the shipment of millions of coronavirus tests to states urging them to use them to reopen. The first televised debate between Trump and Biden is also tomorrow night and investors are eager to hear updated plans from the two
  • China’s economy keeps recovering from the coronavirus pandemic-led crisis. Gross domestic product grew by 3.2% in the second quarter, after falling by 6.8% in the first, compared to a year before. It is now the only major economy expected to grow this year. Successful containment of the pandemic has allowed it to be first in, first out. One feature in common with other countries, however, is the unbalanced shape of the recovery. The supply side has run ahead of the demand side.
  • The yield on benchmark government bonds mostly dropped yesterday. The yield on 2026 bond fell to 7.26%. Further, the yield on 2023 bond declined to 4.55%, while that for the longer-dated 2030 issue marginally rose to 9.50%.

In early trade on Tuesday, the US dollar is trading 0.2% lower against the South African rand at R17.0262, while the euro is trading 0.1% lower at R19.8710.  The British pound has declined 0.1% against the South African rand to trade at R21.8644.

By the close of trade on Monday, the euro had mostly declined against most of the major currencies.

  • The European Central Bank (ECB) President, Christine Lagarde, stated that the central bank is ready to deploy more monetary stimulus to aid the recovery, if needed, as the pandemic ravages the economy.
  • COVID-19 has delivered a triple shock to the developing East Asia and Pacific (EAP) region. The pandemic itself, the economic impact of containment measures, and reverberations from the global recession brought on by the crisis. Swift action will be needed to ensure that the pandemic does not hamper growth and increase poverty for years to come, according to From Containment to Recovery, the World Bank’s October 2020 Economic update for East Asia and the Pacific.
  • Astronauts will very soon be taking a crap in a toilet that costs a whopping $23 million. Science, baby. NASA’s set to launch nearly 8,000 pounds of supplies Tuesday from its Wallops Flight Facility in Virginia to the International Space Station, and the cargo will include the Universal Waste Management System. The toilet, around 28 inches tall will be 65% smaller and 40% lighter than the current John on the ISS, but it’ll have the capability to support larger crews. It will be installed next to the current toilet, and astronauts will test how the new crapper performs in a microgravity environment.

In early trade on Tuesday, the euro has marginally advanced against the US dollar to trade at $1.1688, while it has marginally weakened against the British pound to trade at GBP0.9092.