LOCKDOWN LEVEL 1 [DAY 35]
TOTAL DAYS 216 – 07 HOURS 40 MINUTES
By the close of trade on Tuesday, the South African rand strengthened against the US dollar.
Tito Mboweni is set to deliver the Medium Term Budget Speech later today. With so much going on around the globe it is a wonder if this will even make waves outside our borders, but it will certainly affect us at a local level. The speech will lay out South Africa’s spending priorities over the next three years, with a wider deficit expected due to a lower tax base, and more money thrown at ailing SOE’s, the public finances are sure to remain under strain for the years to come. The speech is televised and begins at 15h00 today.
Investors are dumping US dollars ahead of next Tuesday’s US Presidential election. This will be a historic event for the country, the world and the financial markets. The stakes are high and the outcome is uncertain. There’s a very good chance that the next President of the United States won’t be decided on November 3rd which explains why investors are compelled to reduce exposure and cut positions ahead of the election especially after record breaking gains in stocks this year. A flurry of US economic reports were released today, none of which lent much support to the greenback.
In the US, orders for durable goods rose in September for the fifth month in a row and business investment strengthened again, signaling a steady expansion among manufacturers that have led the way in the US economic recovery.
The S&P CoreLogic Case-Shiller 20-city price index rose on an annual basis in August. Consumer confidence waned in October, reflecting somewhat less optimism about the jobs market and the US economy in the next six months amid another outbreak of coronavirus cases.
The yield on benchmark government bonds mostly fell yesterday. The yield on 2026 bond rose to 7.16%. Further, the yield on 2023 bond declined to 4.35%, while that for the longer-dated 2030 issue dropped to 9.22%.
In early trade on Wednesday,, the US dollar is trading marginally lower against the South African rand at R16.1964, while the euro is trading lower at R19.0722. The British pound has declined against the South African rand to trade at R21.1166.
By the close of trade on Tuesday, the euro declined against most of the major currencies.
The euro fell against the dollar on Wednesday following a media report that France’s government was leaning toward reinstating a national lockdown to curb a resurgence in coronavirus cases. The dollar, however, gave up early gains against other major currencies as sentiment turned bearish due to uncertainty about the outcome of the U.S. presidential election next week.
Australia’s consumers prices rose slightly faster than forecast in the three months through September, reflecting a rebound in childcare and fuel prices, but still well-short of the central bank’s goal. The annual consumer price index rose 0.7% from the second quarter, compared with economists estimates of a 0.6% gain, data from the Australian Bureau of Statistics showed Wednesday.
following a media report that the French government was leaning towards reinstating a national lockdown to curb a resurgence in coronavirus cases.
With many countries in the world seeing a renewed spike in Covid cases, lockdowns and other restrictions are being reimposed. The economic impact of that is likely to increase calls for central banks to step in with more easing. But most have already turned up their easing to the maximum. Central banks would have been in a position to pivot towards a more long-term position if it hadn’t been for the increased case numbers. More easing would likely support the stock market, on top of a desire to move to non-liquid investments. On the other hand, we might expect further weakness in the currency markets.
In early trade on Wednesday, the has euro slipped against the US dollar to trade at $1.1777, while it has weakened against the British pound to trade at GBP0.9034.