DAILY MARKET COMMENTARY

Transcription

1 18 January :54 AM DAILY MARKET COMMENTARY 18 January 2019 Fixed Income and Interest Rates Currencies Commodities Equities LDT JSE performance Economics *Foreign flows Economic calendar #Contacts Click on any of the above links to access your point of interest (* when available) KEY DAILY DRIVERS Nedbank CIB Market Commentary SNIPPETS (Fixed Income) (Currencies) (Commodities) (Equities) (Economics) Front end re-prices lower, but back end continues to trade very poorly despite the increasingly attractive yield pickup now for locals. A weak close in SAGBs Dovish SARB, rates on hold, rand unchanged Oil s after-market rebound waned Thursday after the U.S. Treasury Department disputed a report that the Trump administration might ease trade tariffs against China Disappointing results from retailers weigh on the JSE. European markets end lower, while news that the US is considering lifting tariffs on Chinese goods buoy US and Asian markets. SARB dovish, keeps rates unchanged KEY OVERNIGHT FACTORS AND UPCOMING EVENTS THIS WEEK Nedbank CIB Market Commentary CIBMarketComm@Nedbank.co.za CONTACT FOR QUERIES REEZWANA SUMAD Strategy: Research Analyst Tel: ReezwanaS@Nedbank.co.za Date Region Event Actual/expected/prior Implications 17/01 SA SARB interest rate decision --/6.75%/6.75% SARB likely to remain hawkish, however forecasts likely to be revised lower 18/01 UK Retail sales --/3.6%/3.6% Sales growth may remain positive, but confidence levels have fallen amid Brexit fears 18/01 US Industrial production --/0.2%/0.6% Industrial production likely to slow amidst fall in global trade 22/01 SA Leading indicator --/--/105.7 Leading index likely to remain subdued amidst low confidence levels 23/01 SA CPI --/4.6%/5.2% SA CPI likely to fall as a result of transport costs Source: Nedbank Daily Market Commentary Page 1

2 01/10 16:00 01/10 21:00 01/11 04:00 01/11 09:00 01/11 14:00 01/11 19:00 01/14 09:00 01/14 14:00 01/14 19:00 01/15 02:00 01/15 07:00 01/15 12:00 01/15 17:00 01/15 22:00 01/16 05:00 01/16 10:00 01/16 15:00 01/16 20:00 01/17 03:00 01/17 08:00 01/17 13:00 01/17 18:00 01/17 23:00 01/18 06:00 01/10 12:05 01/10 14:05 01/10 16:05 01/11 07:05 01/11 09:05 01/11 11:05 01/11 13:05 01/11 15:05 01/11 17:05 01/14 08:05 01/14 10:05 01/14 12:05 01/14 14:05 01/14 16:05 01/15 07:05 01/15 09:05 01/15 11:05 01/15 13:05 01/15 15:05 01/15 17:05 01/16 08:05 01/16 10:05 01/16 12:05 01/16 14:05 01/16 16:05 01/17 07:05 01/17 09:05 01/17 11:05 FIXED INCOME AND INTEREST RATES Bond flow sales Corporate Money Markets Business Bank Money Markets Bonds Δ Δ Δ Δ Last price 1d MTD YTD 12Month % bps bps bps bps R208-2,2 yrs 7,11-0,45 11,25 11,25-0,05 11,25 R186-7,9 yrs 8,79-0,30-8,10-8,10 0,00 (8,10) R ,1 yrs 9,81-0,65-8,65-8,65 0,05 (8,65) US 10 yr 2,74-0,93 5,68 5,68 11,54 5,68 UK 10 yr 1,34 2,60 6,00 6,00 2,90 6,00 German 10 yr 0,24 1,90 0,10 0,10-31,90 0,10 Japan 10 yr 0,01 0,50 0,80 0,80-7,30 0,80 Δ Δ Δ Δ Money Market Last price 1d MTD YTD 12Month % bps bps bps bps SA repo rate 6,75 0,00 0,00 0,00 0,00 - SA prime rate 10,25 0,00 0,00 0,00 0,00 - SA CPI (MTD = previous month) 5,20 10,00 50,00 60,00 10,00 SA 3m JIBAR 7,15 0,00 0,00 0,00 0,00 - SA 3m NCD 7,13 0,00 0,00 0,00-2,50 - SA 6m NCD 7,75 0,00 0,00 0,00 15,00 - SA 12m NCD 8,30 0,00-2,50-2,50 37,50 (2,50) US 3m LIBOR 2,78-0,46-3,19-3,19 103,66 (3,19) UK 3m LIBOR 0,93 0,39 1,50 1,50 40,63 1,50 Japan 3m LIBOR - 0,08-0,57-1,05-1,05-5,03 (1,05) Δ Δ Δ Δ FRAs and Swaps Last price 1d MTD YTD 12Month % bps bps bps bps 3X6 FRA 7,16 0,50-5,50-5,50 18,50 (5,50) 6X9 FRA 7,18 0,00 4,00 3,00 4,00 4,00 9X12 FRA 7,21 1,00-12,00-12,00 45,00 (12,00) 18X21 FRA 7,30 1,00-16,00-16,00 34,00 (16,00) SA 2yr Swap 7,23 2,35-10,65-10,65 29,85 (10,65) SA 3yr Swap 7,31-1,00-14,00-14,00 26,00 (14,00) SA 5yr Swap 7,58 0,00-9,50-9,50 28,50 (9,50) SA 10yr Swap 8,13 0,00-7,00-7,00 28,00 (7,00) SA 15yr Swap 8,38-1,50-8,50-8,50 30,00 (8,50) Δ Δ Δ Δ Spreads Last price 1d MTD YTD 12Month % bps bps bps bps 2v10y - 0,90 2,35-3,65-3,65 1,85 (3,65) 3v10y - 0,82-1,00-7,00-7,00-2,00 (7,00) R186-R208 1,68 0,15-19,35-19,35 0,05 (19,35) R2048-R186 1,02-0,35-0,55-0,55 0,05 (0,55) 5y-R186-1,21 0,30-1,40-1,40 28,50 (1,40) 10y-R186-0,67 0,30 1,10 1,10 28,00 1,10 15y-R186-0,41-1,20-0,40-0,40 30,00 (0,40) SA 5yr CDS spread - basis points 203,38 1,06-19,57-19,57 59,74 (19,57) US 10 year yield US 10 year yield 2,76 2,74 2,72 2,70 2,68 2,66 2,64 2,62 2,60 SA 10 year yield SA 10 year yield 8,84 8,82 8,80 8,78 8,76 8,74 8,72 8,70 8,68 8,66 US 10Y R186 Daily Market Commentary Page 2

3 CURRENCIES Business Banking FX Corporate FX Institutional FX A slow morning yesterday as the rand traded in a range ahead of the SARB s MPC meeting. No surprises at the MPC, with rates on hold and a dovish tone; this saw the rand come under some pressure, testing just above the area. It tested a few times but to no avail, and through the New York session, the rand drifted lower again to test just below , touching This morning, it is back around the level. The EUR has done very little over the past 24 hours, trading at this morning more or less where it was last morning but the GBP is slightly higher, trading around Thus, overall, the rand is at the same levels it was last morning, and we do not expect much on the numbers front, so it looks like the rand could be in for a quiet end to the week, ahead of a US long weekend, with a New York holiday on Monday. On the data front, we have the Eurozone current account, UK retail sales and US industrial production data. Possible trading range: Majors Last price -1d MTD YTD 12Month USD trend GBPUSD 1,30 0,11 1,80 1,80-6,49 1,80 USD weakness EURUSD 1,14 0,03-0,55-0,55-6,86 (0,55) USD strength USDJPY 109,40 0,38-0,24 0,24-1,43 (0,24) USD weakness USDAUD 1,39-0,26-2,06-2,06 11,19 (2,06) USD weakness Rand crosses Last price -1d MTD YTD 12Month ZAR trend USDZAR 13,72-0,20-4,79-4,79 11,53 (4,79) ZAR strength GBPZAR 17,81-0,09-2,96-2,96 5,41 (2,96) ZAR strength EURZAR 15,63-0,17-5,36-5,36 5,02 (5,36) ZAR strength AUDZAR 9,87 0,06-2,69-2,69 1,64 (2,69) ZAR strength ZARJPY 7,97 0,59 4,40 4,40-14,63 4,40 ZAR strength African FX Last price -1d MTD YTD 12Month ZAR trend ZARMWK (Malawian kwacha) 53,05 0,23 4,46 4,46-12,76 4,46 ZAR strength ZARBWP (Botswana pula) 0,76 0,22 2,47 2,47-4,79 2,47 ZAR strength ZARKES (Kenyan shilling) 7,41 0,20 4,41 4,41-14,40 4,41 ZAR strength ZARMUR (Mauritian rupee) 2,49 0,49 4,31 4,31-8,75 4,31 ZAR strength ZARNGN (Nigerian naira) 26,43 0,20 4,41 4,41-12,19 4,41 ZAR strength ZARGHS (Ghanian cedi) 0,36 0,20 4,65 4,65-5,13 4,65 ZAR strength ZARZMW (Zambian kwacha) 0,87 0,39 4,55 4,55 7,52 4,55 ZAR strength ZARMZN (Mozambican metical) 4,53 0,21 6,69 6,69-6,96 6,69 ZAR strength Emerging Market FX Last price -1d MTD YTD 12Month USD trend USDBRL (Brazilian Real) 3,75 0,27-3,59-3,59 13,99 (3,59) USD weakness USDTRY (Turkish Lira) 5,35-0,03 1,17 1,17 29,63 1,17 USD strength USDMXN (Mexican Peso) 19,00-0,26-3,53-3,53 1,74 (3,53) USD weakness USDINR (Indian Rupee) 71,11 0,10 1,88 1,88 10,19 1,88 USD strength USDRUB (Russian Ruble) 66,40 0,01-4,48-4,48 14,90 (4,48) USD weakness *Please note that the sign on the % change reflects the change on the headline number. The narrative indicates the trend direction over the month. For trade in any of these currencies, contact our FX dealing desks USDZAR $/R (close, high and low) 01/14 01/15 01/16 01/17 01/18 USDZAR Curncy USDZAR HIGH USDZAR LOW R 14,00 R 13,95 R 13,90 R 13,85 R 13,80 R 13,75 R 13,70 R 13,65 R 13,60 R 13,55 R 13,50 R 13,45 EUR/USD /$ (close, high, low) 01/14 01/15 01/16 01/17 01/18 EURUSD Curncy EURUSD HIGH EURUSD LOW $1,15 $1,15 $1,15 $1,14 $1,14 $1,14 $1,14 $1,14 $1,13 $1,13 $1,13 Daily Market Commentary Page 3

4 01/10 17:00 01/10 23:00 01/11 05:00 01/11 11:00 01/11 17:00 01/11 23:00 01/14 06:00 01/14 12:00 01/14 18:00 01/15 00:00 01/15 06:00 01/15 12:00 01/15 18:00 01/16 00:00 01/16 06:00 01/16 12:00 01/16 18:00 01/17 00:00 01/17 06:00 01/17 12:00 01/17 18:00 01/18 00:00 01/18 06:00 01/10 08:00 01/10 13:00 01/10 18:00 01/10 23:00 01/11 06:00 01/11 11:00 01/11 16:00 01/11 21:00 01/14 02:00 01/14 07:00 01/14 12:00 01/14 17:00 01/14 22:00 01/15 05:00 01/15 10:00 01/15 15:00 01/15 20:00 01/16 03:00 01/16 08:00 01/16 13:00 01/16 18:00 01/16 23:00 01/17 06:00 01/17 11:00 01/17 16:00 01/17 21:00 01/18 04:00 01/09 09:30 01/09 11:30 01/10 09:30 01/10 11:30 01/11 08:30 01/11 10:30 01/14 08:30 01/14 10:30 01/15 08:30 01/15 10:30 01/16 08:30 01/16 10:30 01/16 12:30 01/17 09:30 01/17 11:30 COMMODITIES Nedbank CIB Market Commentary Oil s after-market rebound waned Thursday after the U.S. Treasury Department disputed a report that the Trump administration might ease trade tariffs against China. Gold held a decline amid optimism for progress in U.S.-China trade talks that boosted equities and yields overnight. Palladium traded above $1,400 an ounce. Spot gold -0.1% to $1,291.01/oz. Silver steady; heads for second weekly decline. Platinum -0.1%. Palladium +6.2% this week; heads for biggest weekly gain since Sept. after hitting $1,439.29/oz on Thursday to post fresh record. Copper heads for best close of the year as a fresh bout of optimism over the U.S-China trade stand-off boosts risk assets, nudging the metal back above $6,000 a metric ton. Copper on LME +0.3% to $6,006/ton. Other metals mixed, with aluminium and zinc falling. Iron ore +2% to yuan/ton on DCE. Commodities Last price -1d MTD YTD 12Month Brent near future ($) 61,79 1,00 14,85 14,85-10,85 14,85 WTI crude ($) 52,67 1,15 15,99 15,99-17,64 15,99 Gold spot ($) 1 291,11-0,08 0,74 0,74-2,86 0,74 Platinum spot ($) 813,30 0,57 2,28 2,28-18,94 2,28 SA white maize spot (R) 3 232,00 3,19 10,31 10,31 64,48 10,31 SA white maize SA White maize (ZAR/MT) - 30 day chart R R R R R R R R SA white maize ZAR/MT Platinum vs Gold Brent Crude vs West Texas Intermediate Platinum vs. Gold $1 296 $1 295 $1 294 $1 293 $1 292 $1 291 $1 290 $1 289 $1 288 $1 287 $1 286 $822 $817 $812 $807 $802 $797 Brent Crude vs West Texas Intermediate $63 $63 $62 $62 $61 $61 $60 $60 $59 $54 $54 $53 $53 $52 $52 $51 $51 $50 GOLD PLATINUM BRENT WTI Daily Market Commentary Page 4

5 01/11 01/14 01/15 01/16 EQUITIES Cash equities /31 South Africa The Top40 ended the day down 0.88% at 47,298.40, with the retail sector by far the worst performer on the day, losing 7.62%. Mr Price, Woolworths and Truworths tumbled 16.69% and 9.41%, respectively, after their trading updates disappointed, citing tough trading conditions as consumer confidence remained weak. The Foschini Group bucked the trend, turning sharply positive, adding 3.24% after reporting a solid performance across business segments. The platinum and gold sectors outperformed, adding 3.72% and 2.49%, respectively. The value traded at the close was R22bn, and the ZAR was trading at vs the USD. UK/Europe European markets closed lower on Thursday, weighed down by a profit warning from Société Générale (SocGen) and concerns over the investigation of tech giant Huawei. SocGen lost 5.6% after it stated that its fourth-quarter results would be affected by tough market conditions and asset sales. Exporters, particularly carmakers (-0.8%), lost ground as they are highly sensitive to trade and have large exposure to both China and the US. Markets recovered somewhat in the late afternoon following a firm start in the US. The DAX lost 0.12%, the FTSE100 fell 0.4% and the CAC40 declined 0.34%. USA US markets closed firmer last night after a Wall Street Journal report said the US was considering lifting tariffs on Chinese goods and suggested offering a tariff rollback during trade discussions scheduled for 30 January. Shares of defence contractors rose, lifting the industrial sector, after President Trump unveiled a new US missile defence strategy. Morgan Stanley lost 4.4% after posting disappointing fourth-quarter profits. In after-hours trading, Netflix lost 2% once its results were released. The Dow gained 0.67%, the S&P 500 rose 0.76% and the Nasdaq added 0.71%. Asia Asian markets are trading firmer this morning on the optimism that the US may consider easing trade tariffs. In Japan, sea transport stocks outperformed after the Baltic Dry Index rallied more than 2%. Australian stocks are trading at their highest level since mid-november, with banks and material stocks leading the gains. Gains in copper and iron ore prices lifted the resources sector. Rio Tinto reported a 2% increase each in the production and shipment of iron ore in 2018, with shipments in line with full-year guidance. BHP Billiton was up 0.7% and Rio Tinto added 0.14% Developed Markets Last price -1d MTD YTD 12Month Performance Dow Jones ,10 0,67 4,47 4,47-6,33-6,03 4,47 Nasdaq 7 084,46 0,71 6,77 6,77-2,90-5,30 6,77 S&P ,96 0,76 5,15 5,15-5,79-7,01 5,15 DJ Eurostoxx ,35-0,26 2,26 2,26-15,23-14,00 2,26 DAX ,62-0,12 3,41 3,41-17,79-17,97 3,41 CAC 4 794,37-0,34 1,35 1,35-12,75-10,55 1,35 FTSE 6 834,92-0,40 1,59 1,59-11,25-12,03 1,59 ASX ,60 0,51 4,13 4,13-2,24-6,84 4,13 Nikkei ,82 1,36 3,32 3,32-12,98-14,85 3,32 MSCI World 1 975,61 0,46 4,87 4,87-10,07-10,97 4, Emerging Markets Last price -1d MTD YTD 12Month Performance Hang Seng ,53 1,08 4,63 4,63-15,81-15,30 4,63 Shanghai 2 584,37 0,97 3,63 3,63-25,62-25,52 3,63 Brazil Bovespa ,09 1,01 8,49 8,49 17,77 12,83 8,49 India - NSE ,08-0,04 0,81 0,81 3,12 6,67 0,81 Russia Micex 2 447,64 0,54 3,31 3,31 6,54 9,55 3,31 MSCI Emerging 1 008,99-0,04 4,49 4,49-17,80-18,02 4, SA Indices Last price -1d MTD YTD 12Month Performance JSE All Share ,21-0,65 1,33 1,33-12,29-11,71 1,33 Top ,40-0,77 1,22 1,22-12,43-11,54 1,22 Resi ,78 0,48-0,97-0,97 5,24 12,01 (0,97) Indi ,27-1,07 1,60 1,60-20,32-20,20 1,60 Fini ,96-1,21 3,28 3,28-5,21-6,54 3,28 Short-term performance of SA equity indices SA equity indices 102,00 101,50 101,00 100,50 100,00 99,50 99,00 98,50 98,00 97,50 97,00 Based to 100 at T-5 TOP40 Index FINI15 Index INDI25 Index RESI20 Index Daily Market Commentary Page 5

6 LAST DAY TO TRADE Susan Correia SHARE CODE SHARE NAME DIVIDEND / INTEREST RATE 22 January 2019 CLS Clicks Group Ltd cps IMRP5 IM Redeemable Pref 5Jul cps LEW Lewis Group Ltd 105cps NTC Netcare Ltd 60cps and special 40cps Source: JSE Daily Market Commentary Page 6

7 JSE PERFORMANCE Nedbank CIB Market Commentary Top40 constituents Last price -1d MTD YTD 12Month Performance ABG : Absa Group Ltd 174,24-0,83 7,68 7,68-4,79-11,08 7,68 AGL : Anglo American Plc 317,86 0,72-1,37-1,37 7,05 26,07 (1,37) ANG : Anglogold Ashanti Ltd 175,84 2,85-3,25-3,25 30,30 41,31 (3,25) APN : Aspen Pharmacare Holdings Lt 140,48-1,62 4,20 4,20-45,13-51,42 4,20 BHP : Bhp Group Plc 284,52 0,34-1,71-1,71 10,76 21,24 (1,71) BID : Bid Corp Ltd 268,47 0,03 1,31 1,31-5,00-11,96 1,31 BTI : British American Tobacco Plc 449,45 1,83-4,23-4,23-46,28-43,42 (4,23) BVT : Bidvest Group Ltd 208,13-1,04 0,62 0,62-1,25-5,15 0,62 CFR : Financiere Richemont-Dep Rec 92,67-0,79-1,05-1,05-17,70-16,20 (1,05) CLS : Clicks Group Ltd 191,72-4,28 0,14 0,14 9,24 5,70 0,14 CPI : Capitec Bank Holdings Ltd 1 127,73-0,36 0,87 0,87 8,89 1,83 0,87 DSY : Discovery Ltd 165,38-1,09 3,50 3,50-9,13-14,09 3,50 FSR : Firstrand Ltd 67,56-2,33 3,05 3,05 2,21-2,51 3,05 GRT : Growthpoint Properties Ltd 24,69 0,20 5,97 5,97-11,73-15,76 5,97 INL : Investec Ltd 84,76-0,73 7,29 7,29-7,59-11,95 7,29 INP : Investec Plc 84,61-0,76 6,21 6,21-7,89-11,25 6,21 LHC : Life Healthcare Group Holdin 27,52 0,58 4,24 4,24 3,46-4,86 4,24 MND : Mondi Ltd 322,95-0,63 4,32 4,32 2,99-3,04 4,32 MNP : Mondi Plc 319,05-0,30 4,93 4,93 1,56-4,78 4,93 MRP : Mr Price Group Ltd 215,90-16,69-12,29-12,29-16,38 0,52 (12,29) MTN : Mtn Group Ltd 85,00-1,16-4,49-4,49-38,80-34,85 (4,49) NED : Nedbank Group Ltd 278,37-0,39 1,33 1,33 4,19 7,27 1,33 NPN : Naspers Ltd-N Shs 3 043,74 0,05 5,24 5,24-16,84-16,19 5,24 NRP : Nepi Rockcastle Plc 115,85 0,76 2,52 2,52-33,20-47,09 2,52 NTC : Netcare Ltd 26,50-0,23 0,26 0,26 4,99 5,09 0,26 OMU : Old Mutual Ltd 22,66-1,35 1,16 1,16 1,16 PSG : Psg Group Ltd 239,30-1,35-2,25-2,25-7,25-9,33 (2,25) RDF : Redefine Properties Ltd 9,93-0,70 2,69 2,69-9,73-9,63 2,69 REM : Remgro Ltd 205,00 0,00 5,27 5,27-13,19-17,48 5,27 RMH : Rmb Holdings Ltd 80,54-2,22 2,08 2,08 2,09-0,34 2,08 RNI : Reinet Investments Sca 204,79 0,12-6,25-6,25-21,54-20,27 (6,25) SAP : Sappi Limited 74,16-1,01-9,17-9,17-15,73-8,77 (9,17) SBK : Standard Bank Group Ltd 186,07-1,92 4,06 4,06-6,97-8,61 4,06 SHP : Shoprite Holdings Ltd 186,25-4,82-2,05-2,05-22,23-14,03 (2,05) SLM : Sanlam Ltd 83,40-1,04 4,51 4,51-7,57-8,28 4,51 SOL : Sasol Ltd 415,95-0,02-2,13-2,13-4,38-0,74 (2,13) SPP : Spar Group Limited/The 201,50-4,38-2,89-2,89-2,46 2,05 (2,89) TBS : Tiger Brands Ltd 282,69 3,63 3,25 3,25-37,63-40,48 3,25 TFG : The Foschini Group Ltd 175,49 3,24 5,56 5,56-7,39-15,76 5,56 TRU : Truworths International Ltd 80,70-9,41-8,40-8,40-13,20-6,74 (8,40) VOD : Vodacom Group Ltd 131,90-3,29-0,08-0,08-11,64-9,39 (0,08) WHL : Woolworths Holdings Ltd 49,44-9,98-10,26-10,26-25,80-15,65 (10,26) Daily Market Commentary Page 7

8 % ECONOMICS Nedbank CIB Market Commentary SA In line with our expectations, the SARB unanimously kept the repo rate at 6.75%. We had expected a more dovish set of inflation forecasts by the SARB than the previous MPC. Indeed, the CPI projection was revised sharply lower, while the real GDP growth forecasts were adjusted marginally lower. However, in our view, the more important adjustment came in the SARB s Quarterly Projection Model (QPM), which now shows just one hike of 25bps, compared to three hikes of 25bps projected in November 2018 (or four hikes including the November hike). The MPC has become more dovish because of a few factors. Firstly, the SARB s oil price assumption was revised down to $62/bbl. for 2019, from $73/bbl. previously. Combined with this, the rand appreciated against the dollar and the euro, while fuel costs eased sharply. Because of this, the SARB s headline CPI forecasts dropped dramatically, to 4.8% in 2019 and 5.3% in 2020 (from 5.5% and 5.4% previously). The SARB now sees inflation peaking at 5.6% in 1Q20 (from 3Q19). With a view to achieving a 4.5% inflation rate, the SARB s QPM now shows one hike instead of four over the next two years. Furthermore, since the last MPC meeting, global central banks have become less hawkish, suggesting a slower pace of monetary policy normalisation and this probably influenced the SARB s own outlook. Lastly, the BER inflation expectations survey has shown a reduction in five-year inflation expectations to 5.3% from 5.5% previously. However, the MPC has highlighted that it would still like to see inflation expectations closer to the mid-point of 4.5%. The SARB has tweaked its growth profile slightly higher for 2018 (0.7% vs 0.6% in November 2018), while the 2019 growth rate projection was revised down to 1.7% (from 1.9% previously), and 2020 forecasts were kept unchanged at 2%. Real GDP growth of 2.2% is forecast in Growth risks are still to the downside and are concentrated to electricity constraints, weak confidence levels and structural bottlenecks that impede investment growth. Despite the sharp reduction in the growth forecast for 2019, the SARB s output gap remained unchanged at -0.9%. Synopsis: Our headline inflation forecast is now well above that of the SARB s. We now believe that CPI risks are to the upside relative to the SARB s estimates given a volatile rand and oil price assumption. We see inflation averaging 5.3% in 2019, and 5.2% in 2020, with core inflation at 4.5% in both years. The SARB sees core inflation at 5% and 5.1% over the next two years, which we believe is too high in the absence of any demand-pull inflation. SARB inflation estimates revised sharply lower CPI forecasts Q4:21F Q3:21F Q2:21F Q1:21F Q4:20F Q3:20F Q2:20F Q1:20F Q4:19F Q3:19F Q2:19F Q1:19F Q4:18F Q3:18A Q2:18A Q1:18A Q4:17A Q3:17A Q2:17A Q1:17A SARB Sep 2018 SARB Nov 2018 Nedbank CIB Markets Daily Market Commentary Page 8

9 ECONOMIC CALENDAR Nedbank CIB Market Commentary " " Country Event Period Survey Actual Prior Revised 17-January 12:00 PM EC CPI Core YoY DEC F 1,00% 1,00% 1,00% - 12:00 PM EC CPI YoY DEC F 1,60% 1,60% 1,90% - 03:12 PM SA SARB Announce Interest Rate MAY F 6,75% - 6,75% - 03:30 PM US Initial Jobless Claims NOV k 213k 216k - 03:30 PM US Continuing Claims NOV k 1737k 1722k - 03:30 PM US Philadelphia Fed Business Outlook JAN 9,0 17,0 9,4-18-January 01:30 AM JN Natl CPI YoY DEC 0,30% 0,30% 0,80% - 06:30 AM JN Industrial Production YoY NOV F - 1,50% 1,40% - 11:00 AM EC ECB Current Account SA NOV - - EUR 23,0b - 11:30 AM UK Retail Sales Inc Auto Fuel YoY DEC 3,60% - 3,60% - 04:15 PM US Capacity Utilization DEC 78,50% - 78,50% - 04:15 PM US Industrial Production MoM DEC 0,20% - 0,60% - 04:15 PM US Manufacturing (SIC) Production DEC 0,30% - 0,00% - 05:00 PM US U. of Mich. Sentiment JAN P 96,8-98,3-21-January 04:00 AM CH Industrial Production YoY DEC 5,30% - 5,40% - 04:00 AM CH Retail Sales YoY DEC 8,10% - 8,10% - 04:00 AM CH GDP SA QoQ 4Q 1,50% - 1,60% - 04:00 AM CH GDP YoY 4Q 6,40% - 6,50% - 09:00 AM GE PPI YoY DEC 3,00% - 3,30% - 22-January 09:00 AM SA Leading Indicator NOV 0,0-105,7-11:30 AM UK PSNB ex Banking Groups DEC GBP 2,1b - GBP 7,2b - 11:30 AM UK ILO Unemployment Rate 3Mths NOV 4,10% - 4,10% - 12:00 PM EC ZEW Survey Expectations JAN ,0-12:00 PM GE ZEW Survey Current Situation JAN 42,8-45,3-12:00 PM GE ZEW Survey Expectations JAN -18, ,5-05:00 PM US Existing Home Sales DEC 5,27m - 5,32m - 05:00 PM US Existing Home Sales MoM DEC -0,94% - 1,92% - Source: Bloomberg Daily Market Commentary Page 9

10 CONTACTS Research Analyst Reezwana Sumad (011) Fixed Income and Currency Strategist Walter de Wet (011) Research Publishers (011) ALM Portfolio Management (011) Bond Trading (011) Credit Derivatives (011) Equities Sales and Distribution (011) /31 Forex Business Banking Sales Desk (011) Forex Corporate Sales Desk JHB (011) ; DBN (031) ; CTN (021) Forex Institutional Sales Desk (011) Forex Retail Sales Desk (011) Inflation Trading (011) Interest Rate Swaps & FRA s Trading (011) Money Market Business Banking Sales Desk (011) Money Market Corporate Sales Desk JHB (011) ; DBN (031) ; CTN (021) Money Market Institutional Sales Desk (011) Non Soft & Soft Commodities Trading (011) Preference shares desk (011) Daily Market Commentary Page 10

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