LOCKDOWN LEVEL 1 Ver4 [DAY 3]  Wave 2


By the close of the new York stock exchange yesterday, the South African rand had strengthened against the US dollar.

  • In the US, the Fed held benchmark interest rates near zero and pledged to use the central bank’s full range of tools until the labour market and the economy recover from the pandemic. The Federal Reserve promised to keep funneling cash into financial markets further into the future to fight the recession, even as policymakers’ outlook for next year improved following initial rollout of a coronavirus vaccine. Repeating a pledge to keep its benchmark overnight interest rate near zero until an economic recovery is complete, the U.S. central bank said it would also now tie its program of monthly government bond purchases to that same goal. Purchases would continue “until substantial further progress has been made toward the Committee’s maximum employment and price stability
  • On the data front, US business activity slowed in the first half of December as renewed restrictions to slow a resurgence in new COVID-19 infections hurt the services sector.
  • U.S. retail sales fell more than expected in November, likely weighed down by raging new COVID-19 infections and decreasing household income, adding to growing signs of a slowdown in the economy’s recovery from the pandemic recession. The second straight monthly decline in retail sales reported by the Commerce Department on Wednesday could nudge Congress to agree on another fiscal stimulus package. Still, economists say more money from the government and the rollout of coronavirus vaccines would probably not stop the economy from sharply slowing down and even contracting in the first quarter of 2021.
  • The United States and Europe should agree to cooperate in opposing any future “hurtful” subsidies used by China to build up its commercial aircraft industry, U.S. Trade Representative Robert Lighthizer announced in an interview.  Lighthizer said he was working to settle a 16-year-old dispute between Washington and Brussels over past government aid to aircraft manufacturers, but expressed frustration that current World Trade Organization rules would not prevent future subsidies by the European Union or China.
  • The yield on benchmark government bonds fell on Tuesday. The yield on 2026 bond declined to 6.81%. Further, the yield on 2023 bond dropped to 4.65%, while that for the longer-dated 2030 issue fell to 8.75%.

In early trade on Thursday, the US dollar is trading lower against the South African rand at R14.7922, while the euro is trading lower at R18.0666.  The British pound has marginally declined against the South African rand to trade at R20.002.

By the close of the bell yesterday, the euro advanced against most of the major currencies.

  • The post-Brexit trade talks may be inching towards an agreement – but it is still possible the two sides will run out of time. The current transition period, during which the UK continues to follow EU rules, began when the UK left the EU, on 31 January, and it ends on New Year’s Eve. If there is no agreement by then, the UK would have no deal with the EU on trade, or on other issues such as security cooperation and fishing. But could there be a legal fix to allow both sides to keep talking if necessary? And what would happen if a deal was agreed only at the very last minute?
  • The Bank of England is expected to refrain from yet more stimulus on Thursday as it waits to see if a possible no-deal Brexit in two weeks’ time deepens the problems already facing Britain’s coronavirus-damaged economy. London and Brussels are still trying to avoid the shock of import tariffs on trade from Jan. 1, so the BoE looks set to leave its bond-buying programme at 895 billion pounds ($1.2 trillion), having ramped it up by 150 billion pounds last month.
  • Germany’s private sector showed resilience in December, as manufacturing picked up steam and services partly recovered ahead of a stricter lockdown to contain a second wave of coronavirus infections.
  • In the UK, inflation slowed by much more-than-expected in November, possibly reflecting Black Friday discounts as clothing and footwear prices fell by the most in a decade.
  • New Zealand’s economy bounced back strongly from recession in the third quarter as massive fiscal and monetary stimulus sparked a recovery in consumer spending. Gross domestic product surged 14% from the second quarter, when it contracted a revised 11%, Statistics New Zealand said Thursday in Wellington. Economists forecast a 12.9% gain. From a year earlier, the economy grew 0.4%, confounding the consensus forecast for a 1.8% decline. New Zealanders have gone on a spending spree since the nation eliminated community transmission of Covid-19 in May and then successfully contained sporadic outbreaks.

In early trade on Thursday, the euro advanced against the US dollar to trade at $1.2222, while it has marginally weakened against the British pound to trade at GBP0.9066.