By the close of trade on Tuesday, the South African rand strengthened against the US dollar.

  • The G20 group of major economies is poised to extend a multi-billion-dollar debt freeze for the world’s poorest countries to help them weather the coronavirus crisis, and may adopt a common approach to dealing with longer-term debt restructurings. Finance ministers and central bankers from China, the United States and other G20 countries mapped out their plans in a draft communique, and are due to finalize the wording when they meet online early today.
  • South African annual mining production eased off in August, as both the local and global economy opened up further, hinting that the industry may be one of the first to regain some of the ground lost to the coronavirus pandemic.
  • In the US, consumer price index (CPI) rose in September, with the cost of cars and trucks rising by the most since 1969. However, inflation is slowing, amid excess capacity in the economy as it gradually recovers from the COVID-19 led recession.
  • Xi Jinping’s speech in Shenzhen comes at a crucial time for Chinese stocks, which are now within 1% of a five year high. The CSI 300 Index, which has been stuck in a narrow range for about three months, is close to surpassing July’s peak after a strong start to the new quarter. Rising turnover and an increase in margin debt also shows traders are turning more bullish. The index was down 0.5% as President Xi began his speech. Stocks had rallied in anticipation of his visit to the southern city, where most of the country’s technology giants are based.
  • The world’s second largest economy imported goods at a faster than expected rate as Chinese consumption powered ahead signaling continued strength in infrastructure and property investment. Exports remained strong riding the recent strength of retail sales among China’s major trading partners while its trade surplus with the United States narrowed. China’s exports growth accelerated to 9.9% on year in September from 9.5% in August while imports grew 13.2% on year in September, reversing August’s contraction of 2.1%, data published on Tuesday showed.
  • The yield on benchmark government bonds fell yesterday. The yield on 2026 bond dropped to 7.15%. Further, the yield on 2023 bond declined to 4.48%, while that for the longer-dated 2030 issue dipped to 9.40%.

In early morning trade on Wednesday, the US dollar is trading lower against the South African rand at R16.4583, while the euro is trading lower at R19.3271.  The British pound has declined 0.1% against the South African rand to trade at R21.2822.

By the close of trade on Tuesday, the euro declined against most of the major currencies.

  • Bank of England Governor Andrew Bailey said he did not think the economy was undergoing a sharp, ‘V’-shaped recovery, because of headwinds from a second wave of COVID and underlying public caution about spending and socialising after the pandemic. “A ‘V’ is really not the way I look at it in terms of what we face going ahead,” Bailey told the House of Lords’ Economic Affairs Committee. “The recovery will take time.” Economic output at the end of September was probably 9-10% below its level a year earlier, he added, compared with a 22% shortfall at the end of June.
  • Euro finally broke down on Tuesday as it experienced its strongest one day slide in 3 weeks against the US dollar. The rise in new coronavirus cases pose a major risk to the region’s outlook. France, Germany and Spain all reported significant spikes in cases, which has caused significant concern for investors and central bankers.
  • On the data front, German CPI fell in line with investor expectations on a monthly basis in September. Investor sentiment in Germany fell more-than-expected in October, as a rise in coronavirus cases increased uncertainty about the outlook for Europe’s largest economy.  A separate gauge of current conditions slightly improved in October.
  • At least four major Chinese steel mills have started diverting orders of Australian coking coal to other countries as a ban on shipments takes effect, analysts said. Chinese steel mills and state-owned utilities revealed over the weekend Beijing verbally ordered them to stop buying Australian coking coal, as well as thermal coal used in electric power generation. The Australian government has refused to speculate the ban is a fresh salvo in a broader diplomatic tussle between the two countries, but some analysts have said it is likely politically motivated.

At 06:00 SAST, the euro marginally slipped against the US dollar to trade at $1.1743, while it has marginally weakened against the British pound to trade at GBP0.9078.