Rand flatlines overnight
JOHANNESBURG - The South African currency strengthened as oil price gains and demand-side data out of China countered surging infection rates and shrinking expectations for US fiscal stimulus according to NKC Research.
Data out of China provided an early-morning jolt as demand side data improved, with a pick-up in growth of investment, consumption and exports. Household consumption returned to y-o-y growth in September-October and we expect it to continue to gain pace going forward, supported by an unwinding of the increase in household saving.
The rand is expected to rank among the primary beneficiaries of a China-led reflation, as our baseline scenario is for China GDP to jump to 7.8 percent in 2021 from 2.0 percent this year.
At the close of local trade, the rand quoted 1.16 percent stronger at R15.33/$, after trading in range of R15.33/$ - R15.54/$. The local unit flatlined overnight. Expected range today R15.20/$ - R15.50/$.
South African bourse
South African Government bonds traded firmer yesterday. At the close of local trade, R186 was marked-to-market at 6.930 percent, 4.5 bps lower. Positive risk-on sentiment is expected to drive inflows into local government bonds despite a brittle fiscal environment and low-growth trap. While we expect an economic rebound of 4.9 percent in 2021 following a deep contraction of 8.9 percent this year, substantial policy changes will be needed to raise potential growth over the medium term.
Brent crude oil
The Brent oil price strengthened in line with surging global stock markets yesterday. Moreover, positive economic data out of Japan and China supported prices, while hope of further Opec+ production cuts outweighed fuel demand concerns. At the close of local trade, benchmark Brent crude futures quoted 4.36 percent higher at $44.49pb. Crude prices aimed higher during Asian trade this morning.
BUSINESS REPORT ONLINE