Daily Market Commentary: PMK Group
Market Commentary USD/ZAR 18.60 GBP/ZAR 23.01 EUR/ZAR 20.14 AUD/ZAR 11.27 SA
2020-04-03
There appears to be no end in sight for rand weakness, with the local unit recording its worst levels against all major currencies. The fragile rand and the selling of risky assets remain a concern ahead of the closely watched US non-farm payroll data out this afternoon. The Covid-19 virus shutdown is highly likely to halt 113 straight months of employment growth for the US, with data indicating that a record number of Americans filed for unemployment benefits in the last two weeks. Sombre scenes haven’t left the muddy oil fields yet as recent price gains were short-lived, signalling market scepticism about yesterday’s Trump-broker.
A degree of inconsistency and a marginal bias to the downside in the Asian region, a lacklustre tone on US futures markets and some weakness in the Rand which is marginal (rather than decisive) hints at modest selling pressure on the JSE at the commencement of today’s session. Short term metrics on the JSE-ALSH, JSE-INDI and JSE-TOPI remain stretched with an elevated likelihood of profit taking from current levels. We remain of the view that current short-term strength should be used as an opportunity to engage in profit taking particularly in counters which have enjoyed brisk upside in recent sessions. The gold board remains the exception with available technical evidence indicating that short-term trading exposure should be retained in the wake of reversal in numerous technical metrics.
The BD editorial today inveighs against the public sector unions adhering to demands for higher wages despite the affordability thereof being lamentably magnified multifold in recent weeks. Strike still on?
Masks on after all- The NICD, along with the White House and others are reviewing their earlier stance that masks should be reserved for the front line workers.
SA 1462 cases - As the global tally passes 1m SA reports 7 deaths. Who knows how many people passed on or caught the virus in those social distance ignoring SASSA benefit queues?
Global
Was a phone call to his friend MBS (Crown Prince of Saudi Arabia) and subsequent tweet about it, enough to scare our heroic oil Tweedledums and Tweedledees into forgetting their quarrel? President Trump says he spoke to MBS who spoke to Putin and he is optimistic that they will cut back production by 10mbpd or more. The trouble is, the decline in consumption right now is probably two or three times that number. And Putin, while giving it serious consideration must be thinking, “And we must cut back to save the shale boys? Just when we’ve got them on the ropes? Nah! Let’s stick it to them for a few more weeks!”
References: PMK investment committee, Exchange 4 free , Momentum Investment Consultants, Momentum securities, RMB Global Markets
It does seem strange that Trump expects them to react to his suggestion without any quid pro quo (apparently) from shale producers being mentioned. Nevertheless, it might present a face-saving opportunity for the “Tweedles” to tone down their quarrel. If so, and the oil price maintains yesterday’s leap to just under $30/bbl, it will be one of the most positive achievements of his presidential term. And, we have to say, we underestimated the power of a Trump tweet!
Ed Morse, head of commodities research at Citigroup says “It’s too little too late. Cuts are required immediately, and unless they happen the price is going to go down significantly and force them to happen.”
So, until there is an announcement from the oil producers, Brent crude is likely to recede from yesterday’s levels and, with it, the price of Sasol.