Weekly Market Insights 17 – 21 January 2022

We are proud to share our Weekly Market Insights with you, ensuring that you do not miss out on any information.

 

Local

Aside from the release of local manufacturing data, there was not much to report on the economic front last week. However, the new week will see the release of data on mining production, retail trade, wholesale trade, and motor vehicle sales.

Statistics South Africa (Statssa) reported that manufacturing output fell 0.7% in November 2021 compared to November 2020. Negative contributions were made by the petroleum, chemical products, rubber and plastic products, and furniture and ‘other’ manufacturing divisions.

The largest positive contributions came from the iron and steel, nonferrous metals, fabricated metal products, and machinery departments.

 

International

In the U.S., Consumer Price Index data (CPI) showed that inflation in the world’s largest economy remained high at 7% year-on-year (y/y). Core data CPI came in at 5.5% y/y, slightly above consensus (5.4%).

Federal Reserve Chairman Jerome Powell did not provide markets with any new information on the timing of rate hikes and the end of bond purchases in his hearing before the Senate. However, the Fed Chairman pointed to concerns about persistent inflation and said he was prepared to act, even as he was wary of the implications for the group’s maximum employment mandate. Markets now anticipate an increased likelihood of three rate hikes by the Federal Reserve this year.

 

The Rand

The rand strengthened this week, particularly against the U.S. dollar, although the gains against the greenback were primarily due to dollar weakness rather than rand strength.

The dollar has lost significant ground against a broad basket of currencies, despite strong inflation figures from the United States. The dollar’s weakness suggests that markets had previously priced in a more aggressive Fed stance than we saw this week.

In the short term, we now see the USD/ZAR trading in a range between R15.15/$ and R15.50/$. However, the longer-term trend remains upward and still favours dollar strength / rand weakness.

 

Commodities

A weaker dollar has generally supported commodity prices.

According to a report from the International Energy Association, oil demand has now returned to pre-pandemic levels, while global supply continues to be constrained by major producers such as the Organisation of the Petroleum Exporting Countries (OPEC) and its allies (OPEC +).

Copper supply chains remain disrupted, while global inventories are at their lowest levels in several decades, supporting the near-term rise in the industrial metal.

The rise in gold prices, while supported by a weaker U.S. dollar, also suggests that the metal has some renewed appeal as an inflation hedge.

 

Company

Anglo American PLC: announced the completion of the sale of its 33.3% interest in the Cerrejón joint venture to Glencore for a total cash consideration of $294.00 million, completing the company’s exit from the thermal coal business.

BHP Group: acquires a minority interest in a nickel project in Tanzania, increasing its exposure to the green energy sector.