LOCKDOWN LEVEL 1 [DAY 41]  

TOTAL DAYS 222 – 07 HOURS 40 MINUTES

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

  • November has kicked off with one of the most closely watched elections in US history, widespread COVID-19 lockdowns in Europe, three central bank monetary policy announcements and labor market reports from the US, Canada and New Zealand. Despite all of these big events and the uncertainty, the Dow Jones Industrial Average rebounded after last week’s losses. The US dollar traded higher against euro, Japanese Yen and other major currencies. While its hard to justify optimism this price action reflects the market’s hope for a definitive election outcome on Wednesday.
  • In South Africa, the Absa’s purchasing managers’ index (PMI) showed a steady recovery in manufacturing business conditions for October, as the sector recovered further from COVID-19 restrictions.
  • In the US, the ISM manufacturing PMI advanced more-than-expected in October, with new orders jumping to their highest level in nearly 17 years, amid a shift in spending toward goods like motor vehicles and food as the COVID-19 pandemic drags on.  The headline rose to 59.3, the best outcome since September 2018, well above both the 56.0 consensus and September’s 55.4 reading. New orders rose to 67.9 from 60.2, leaving it at its highest level since 2004 while production rose to 63 from 61. With customer inventories continuing to be run down – currently, at a decade low of 36.7 – this suggests ongoing healthy gains.
  • The yield on benchmark government bonds rose yesterday. The yield on 2026 bond rose to 7.10%. Further, the yield on 2023 bond advanced to 4.24% while that for the longer-dated 2030 issue rose to 9.36%.

In early trade on Tuesday [Election day in the US], the US dollar is trading lower against the South African rand at R16.2002, while the euro is trading lower at R18.8766.  The British pound has marginally gained against the South African rand to trade at R20.9233.

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

  • China is expected to ban imports of Australian wheat, putting a A$560 million (US$394 million) trade in doubt, with the grain the latest to join a list of new blocks on Australian products, according to industry sources. From Friday, barley, sugar, red wine, timber, coal, lobster, copper ore and copper concentrates from Australia, are expected to be barred from China even if the goods have been paid for and have arrived at ports. The ban on wheat is likely to follow, although a date has not yet been set, sources said. It is understood that Beijing will communicate the bans to all Chinese state-owned and private businesses.
  • Over the weekend, PM Boris Johnson announced that the UK will enter a national lockdown from Thursday until December 2nd, when the current local tier system will be used again. Although restaurants and bars and non-essential stores will close as they did in the first lockdown, schools, colleges and universities, and manufacturing businesses will remain open. Combine this with Brexit jitters and an expected dovish BOE on Thursday, the Pound pairings are under pressure.
  • Data showed that manufacturing activity in the eurozone advanced in October. However, the recovery from severely depressed activity at the height of the coronavirus pandemic was again mostly driven by a buoyant Germany.
  • Meanwhile, the European Central Bank Board member, Yves Mersch, stated that the bank will not extend the flexibility of its crisis-fighting Pandemic Emergency Purchase Programme (PEPP) to other bond buying schemes, which must remain bound by the bank’s “red lines”.

In early trade on Tuesday, the euro advanced against the US dollar to trade at $1.1652, while it has gained against the British pound to trade at GBP0.9027.

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