DAY 4 LOCKDOWN

The second black swan event hit hard on late Friday as Moody’s downgraded South Africa (SA) to Ba1 with a negative outlook (from Baa3). SA is now junk-rated by all major rating agencies. Losing our last investment-grade rating will mean being booted out of the World Government Bond Index (WGBI), with potentially R80bn to R120bn of bonds that are likely to be sold by foreigners.

Faced with an unprecedented crisis, economists and investors are racing to understand the depth of the coronavirus recession and its aftershocks. The problem is, the datasets they’d typically rely on are practically useless.  Take the monthly US jobs report, which is due out for March this Friday. In normal times, it provides crucial information: How many jobs were added to the economy? What’s the unemployment rate? Did wages go up? A vital snapshot of America’s economic health.

In early trade on Monday the Rand is reeling at 17.97  The big question is where to from here?

  • Unfortunately, Covid-19 looks set to continue dominating the thoughts of the world as we start the week. US markets faded on Friday as buy the rumour, sell the fact swept financial markets into the weeks close.  U.S. deaths from coronavirus could reach 200,000 with millions of cases, the government’s top infectious diseases expert warned on Sunday as New York, New Orleans and other major cities warned they would soon run out of medical supplies.
  • The U.S. dollar has taken a beating, however, dropping almost 4% against a basket of currencies this week—its biggest weekly loss since the height of the global financial crisis over 10 years ago.
  • The long-awaited $2 Trillion stimulus package was finally signed into being.
  • China’s central bank injected liquidity into the financial system via open-market operations for the first time since Feb. 17, ending the longest hiatus since December 2018. It also cut interest rates on the loans. The People’s Bank of China will inject 50 billion yuan ($7.1 billion) into the banking system using 7-day reverse repurchase agreements, according to a statement Monday.
  • Rocket man was back at it again.  North Korea fired what appeared to be two short-range ballistic missiles into the ocean off its east coast on Sunday, the latest in an unprecedented flurry of launches that South Korea decried as “inappropriate” amid the global coronavirus pandemic.  In other sabre rattling news, Ballistic missiles were intercepted on Saturday in the sky above Saudi Arabia’s capital Riyadh and the southern city of Jazan.  Residents in Riyadh reported multiple blasts around 2320 (2020 GMT), followed by emergency vehicle sirens in some northern districts.
  • The yield on benchmark government bonds rose on Friday. The yield on 2021 bond advanced to 5.08% while that for the longer-dated 2030 issue rose to 11.65%.

In early trade on Monday, the US dollar is trading 1.7% higher against the South African rand at R17.9542, while the euro is trading 1.3% higher at R19.8810.   The British pound has gained 1.1% against the South African rand to trade at R22.1941.

By the close of trade on Friday, the euro mostly advanced against most of the major currencies.

  • Meanwhile, reports indicated that the European Central Bank (ECB) Chief, Christine Lagarde, urged the European Union leaders to act more decisively to cushion the economic hit of the pandemic.

In early trade on Monday, the euro slipped 0.4% against the US dollar to trade at $1.1091, while it has gained 0.2% against the British pound to trade at GBP0.8958.

NOVEL CORONAVIRUS STATS

714,255 confirmed cases

33,753 reported deaths

148,870 recovered*

South Africa

Confirmed 1,280

Dead 2

Recovered 31

Contracted Today 0

Died  Today 0

Last updated Mar 30, 2020