LOCKDOWN LEVEL 3  [Adjusted ver. 3] 

TOTAL DAYS 521 – 07 HOURS 35 MINUTES 

Vaccine rollout day 203
New cases  7086
New Deaths 431
Recovery Rate 91,6%

By the close of trading on Tuesday 31st August 2021, the South African rand strengthened against the US dollar. We find ourselves on the first day of Spring and the downward run to the year end!  Justified or not, markets are known for obsessing about the next piece of information to provide trading direction. This year’s focus on Federal Reserve Chair Jay Powell’s Jackson Hole speech was no different.  The Rand has remained on the front foot. Could we see a move below 14 this Spring?

  • In the US, consumer confidence declined to a six-month low, amid worries about rising coronavirus infections and concerns about domestic inflation levels.
  • The S&P Case-Shiller composite index rose in June, as buyers with cash for down payments, and low interest rate loans increased demand for homes available for sale and boosted the prices.
  • The Federal Housing Finance Agency (FHFA) showed that the domestic house price index rose to its highest level in 12 months in June.
  • The Chicago PMI dropped in August.
  • Chinese manufacturers signalled a slight deterioration in business conditions in August, driven by a renewed drop in output and a further fall in new work. Panelists often stated that the resurgence of the COVID-19 virus at home and abroad had weighed on the sector’s performance. Restrictions to contain the virus also impacted supplier performance, which deteriorated solidly, while shortages led to steeper rises in cost burdens and prices charged. At the same time, subdued market demand led firms to trim their purchasing activity and payroll numbers slightly.
  • Chile’s central bank shocked economists with its biggest interest rate increase in 20 years as government stimulus propels consumer demand and pushes inflation above target. Policy makers led by Mario Marcel, lifted the overnight rate by 75 basis points to 1.5% on Tuesday.
  • The yield on benchmark government bonds were mixed yesterday. The yield on 2026 bond rose to 7.30%. Further, the yield on 2023 bond declined to 4.89%, while that for the longer-dated 2030 issue stood at 8.76%.

In early trade on Wednesday 1st September 2021, the US dollar is trading higher against the South African rand at R14.5126, while the euro is trading lower at R17.1528.    The British pound has declined against the South African rand to trade at R19.9747.

By the close of trade on Tuesday 31st August 2021, the euro advanced against most of the major currencies.

  • Shoppers saw the fall in shop prices slow down over the past month, increasing the prospect of inflation, according to new figures. The BRC-NieslenIQ shop price index for August revealed that shop prices decreased by 0.8% year-on-year. However, this represented a significant slowdown from 1.2% deflation in July, amid fears that supply chain disruption is increasing costs for retailers who could pass some of this cost to customers.
  • In the eurozone, inflation accelerated at the fastest pace in 10 years, boosted by rise in energy prices.
  • In Germany, unemployment declined more than expected in August, despite a spike in coronavirus infections, following an increase in the hiring process.
  • Japanese companies’ capital spending rose in the April-June quarter, the first increase since the start of the global pandemic and a sign of revived corporate activity even as a resurgence in COVID-19 cases hit the services sector. Analysts said the figures will contribute to an upward revision of Japan’s second quarter GDP, which grew at 1.3% according to a preliminary estimate as private consumption and business activities recovered from the impact of the pandemic. Wednesday’s data offered a positive note for embattled Prime Minister Yoshihide Suga, who faces his ruling party’s leadership race this month.
  • Australian housing values continued to record a broad-based rise despite the disruption from lockdowns. According to CoreLogic’s national home value index, dwelling values rose 1.5% in August; a rate of growth that is still well above average, but the lowest monthly rise since January.

In early trade on Wednesday 1st September 2021, the euro held against the US dollar to trade at $1.1832, while it has gained against the British pound to trade at GBP0.8586.

The lineage B.1.617 of the SARS-CoV-2 virus, also known as the Delta variant, has been the dominant virus variant recently, prompting countries to reinstate containment measures and causing concerns for many policymakers around the world. The highly infectious variant was first detected in India in late 2020 and has been spreading in Southeast Asia and further to other countries of Asia, Europe, Africa, and the Americas. By early August 2021, the Delta variant has been responsible for more than 90% of all infections in places such as Singapore, China mainland, the UK, Australia, Germany, and the US.

Trade, travel, and tourism have recovered to varying degrees from the lockdown measures but are clearly not out of the woods yet. While trade might be able to continue to rebound, travel and tourism will likely face yet another period of uncertainty as cases flare up in different parts of the world. Countries with a strong reliance on tourism will be affected.

The economic recovery that is likely to ensue is an upturn that pits the smaller but wealthier share of the world that is vaccinated against the larger but poorer share of the world economy that lags in the vaccination race. In other words, most of the G7 nations (plus China mainland) are expected to perform relatively well, while uncertainties will remain especially high in other parts of the world.