Deal or no deal

GM Daily: Deal or no deal

Global: Progress signalled in US stimulus talks, UK Brexit talks still stalled

SA: List of countries on SA’s red list reduced to 22

Rand: Screaming sideways around 16.50 to the US dollar

Local rates: Important auction today

What to watch today

• GE PPI (y/y)
• SA Leading Indicator
• EC ECB Current Account SA
• US Housing Starts

Covid-19 update

Source: WHO, NICD

Economics and markets

• Recent news from Nancy Pelosi’s office that the gaps in US stimulus talks between the Democrats and GOP are closing lifted the S&P 500 from its two-week low yesterday before US markets closed.
• It would seem that markets continue to wait on news about an actual deal though (with Nancy Pelosi’s deadline falling today) and as such, the Nikkei, Hang-Seng and ASX are all trading weaker.
• Currency movements are largely rangebound, waiting for news of a deal (or not). The rand is drifting around the 16.50 level against the greenback.
• Deal-making seems to have stalled between the UK and EU.
• SA’s red list – a list of countries from which people cannot visit SA as tourists – has been narrowed to 22 countries, down from 60 previously, in a bid to attract more foreign visitors to boost the ailing tourism sector.
• USD/ZAR opens at 16.52; EUR/ZAR at 19.44; GBP/ZAR at 21.39 and CNY/ZAR at 2.47.

While I drifted around the Kruger National Park last week (and the week before), with gloriously intermittent cell phone signal, there were only a few push notifications on my phone that I absorbed: the announcement of the President’s economic speech to parliament (last week Thursday), the request for the MTBPS’ postponement, and, vitally, that SA is facing a Marmite shortage. I am one of those people who like Marmite – I even liked my Marmite school sandwiches! I’m guessing this audience will reflect the polarity on the stuff that I have seen among my own social circle…people either love Marmite or they hate it! Fortunately, Skukuza still had Marmite on the shelves, so I got myself an emergency bottle, but for those who were unable to stockpile their savoury, salty and yeasty spread, there is good news. Pepsi, the owner of Marmite in SA, has said that the iconic yellow-capped bottle will be back on shelves in about two weeks’ time. Crisis averted! Interestingly, the reason for this shortage, as with many others, is covid-related restrictions. When breweries stopped or reduced their beer production during lockdown, spent brewer’s yeast, a by-product of beer production, also became unavailable – and this is one of the core ingredients in Marmite. 

Markets may not react to a South African Marmite shortage, but there seems to be a real desperation for good news, which is why the recent news from Nancy Pelosi’s office that the gaps in US stimulus talks between the Democrats and GOP are closing lifted the S&P 500 from its two-week low yesterday before US markets closed. This has pushed US futures higher in trade this morning. As a slow news day, it would seem that markets continue to wait on news about an actual deal though (with Nancy Pelosi’s deadline falling today) and as such, the Nikkei, Hang-Seng and ASX are all trading weaker. China’s bourse is marginally up, probably due to the world’s second-largest economy having had the most recent positive data release of import. Similarly, currency movements are largely rangebound, waiting for news of a deal (or not). The rand is drifting around the 16.50 level against the greenback. 

Deal-making seems to have stalled between the UK and EU, with David Frost, the UK’s chief negotiator, taking to twitter to echo his PM’s call that the EU needs to make a fundamental change in its approach to these negotiations before the UK returns to the “negotiating table”. However, it would seem that members of the EU negotiating team have more hope that talks will resume before the week ends. Time for a deal is quickly running out, with many businesses on both sides probably watching closely as the margin to implement a “no deal” contingency plan before the 31 December exit deadline will be very narrow. 

Closer to home, the negotiations we have almost forgotten about are on the FY20/21 wage increase for public sector employees. However, having already stalled, we await a neutral third party to weigh in – the SA court system. In the meantime, probably in a bid to boost tourism, which is only starting to recover from lockdown, SA’s red list – a list of countries from which people cannot visit SA as tourists – has been narrowed to 22 countries, down from 60 previously. Another change is that foreigners who plan to visit SA for an extended period (like those who own property in SA), even if they are from red-list countries, will be allowed to visit. This could increase the number of visitors to local shores, but they are unlikely to come in floods, as being allowed to enter SA does not mean that people will choose to travel, particularly by air, while covid-19 continues unabated and in the absence of a cure or vaccine. 

In the meantime, I cannot encourage you enough to travel locally, especially if you are “stuck” in SA and typically only go on holiday abroad – it is a beautiful country with wonderful bushveld, spectacular beaches and mountain with lots to do and discover. Don’t forget to pack Marmite for your travels though, in case supplies are low at your destination (at least for the next two weeks)! 

Siobhan Redford

Local rates

The recent rally in yields will be sorely tested today with another R6.6bn in bonds on offer from the National Treasury. This morning, we have something for everyone, with the short-dated R186, belly R2032 and ultra-long R2040 available on the menu. The R186 should be well-supported by the banking fraternity and the R2040 should see demand from investors with longer-term liabilities which need to be matched. This leaves the R2032 as the bond most likely to clear the weakest versus current market levels, and with the R2032 marked at 10.32%, it does offer value when compared to the R2030, just two years shorter, which is trading at 9.25%.

The market is still nervous, however, with the MTBPS next week. An increase in issuance does not seem to be on the cards, but these budgets have been known to disappoint the market in previous years, which may mean the reduction in either the issuance or the size of the green-shoe option the market is hoping for may also not be forthcoming.

No major economic data out today except for the SARB’s Leading Indicator this morning at 09:00.

Deon Kohlmeyer