The Week Ahead 221012

The Week Ahead 6 – 10 April

International news

The threat of a global recession becomes far more likely with current economic disruptions in the first quarter likely to continue into the second quarter of the year. The pandemic is rapidly spreading in the Euro Area and the US, shutting down the largest economies in the world. While there is some evidence that China is starting to get back to work, many of its trading partners have and will be disabled for the near term.

The US non-farm payroll numbers highlight the severe economic impact the pandemic is having. The data showed that the number of people employed in March 2020 had fallen by 700 000, far exceeding the consensus of estimates which predicted a contraction of 100 000 in the number of persons employed. The unemployment rate in the US has now moved from 3.5% in February to 4.4% in March as a result.

Local news

Moody’s Investor Relations has finally downgraded South Africa’s local currency debt to sub-investment grade (junk). The sub-investment grade rating aligns with major ratings agencies S&P Global and Fitch Solutions.

The Moody’s downgrade means that South African Government Bonds will be removed from the FTSE Russell’s World Government Bond Index (WGBI) as the WGBI cannot use speculative Bond Indices in its constituent weightings. This will result in net selling of SA bonds (estimated at around $10 billion). However, the FTSE Russell’s WGBI is delaying the reweighting of the index until the COVID-19 effects on liquidity and spreads start to dissipate.

For more information on the ratings downgrade and its effects on the rand click here.

Following on from South Africa’s ratings downgrade on Friday (27 March) to sub-investment grade (junk), by Moody’s Investor Relations, it comes as little surprise that Moody’s has now also downgraded the long-term local currency and foreign currency deposit ratings of South African banks, ABSA, FirstRand, Nedbank, Investec and Standard Bank. Fitch Solutions also lowered its already sub-investment grade rating on the banks one notch further as well.

South African banks’ ratings reflects Moody’s expectation that the weak economic environment will increase the downside risks for bank’s credit profiles.

For more information on South African banks and the trading opportunities they may be offering at present, click here.

The Rand

The rand is currently battling both domestic and external pressures. The growing Covid-19 pandemic has kept a risk off undertone and seen selling in emerging market currencies such as the rand, the Brazilian Real, Indian Rupee and Turkish Lira to name a few.

In terms of domestic pressures, the rand has seen a belated sell off after its local currency debt was downgraded to sub-investment / speculative status by Moody’s Investor Relations. Appetite for local bonds has waned, pushing yields higher and prices lower. The domestic catalyst for weakness in the ZAR is noted by the currency’s underperformance against other emerging market currencies which have been softer in the week as well.

The R20/$ becomes a very distinct possibility in the wake of global risk aversion and domestic economic woes which are exacerbated by the very necessary lockdown currently underway.

Commodities

Oil prices have started to rebound late in the week, following news that the Organisation of Petroleum Exporting Countries (OPEC) have scheduled an emergency meeting for Monday the 6 th of April. The meeting will include non-OPEC members, most importantly Russia. Speculation is that major oil producers could be meeting to discuss supply cuts to end the current price war underway. There is also the suggestion that the US, UK, Canada and Mexico could be invited to the meeting as well. The news whether coincidence or not, follows coments from US president Donald Trump that massive production cuts could be nearing.

Companies

Nampak Limited: The disposal of Nampak Glass was effective as of midnight on 31 March 2020. The proceeds were received in cash on 31 March 2020.

Rebosis Property Fund Limited: announced that due to the impact of nationwide lockdown, the JSE has acceded to the firm’s request to release the company’s interim results in the last week of June 2020.

African Rainbow Minerals Limited: has received authorisation from the Minister of Mineral Resources and Energy to operate its load-out stations at Khumani and Beeshoek mines in order to continue loading iron ore from the mines’ respective stockpiles.

Vukile Property Fund Limited: has guided that even after taking into account the impact of the COVID-19 pandemic in Southern Africa and Spain, FY20 distributable EPS is still expected to remain within the guidance of 3.0% to 5.0% growth, when compared to the prior year.

Northam Platinum joins peers in declaring force majeure: Northam Platinum has declared force majeure on its supply of platinum group metals (PGMs) to its four customers and it is considering limited mining at its mechanised Booysendal operations.

Capital & Regional Plc: has guided that all seven of its community shopping centres currently remain open to provide essential services during the current nationwide lockdown. Approximately 23.0% of the group’s occupiers by contracted rent remain trading.

Trencor Limited: FY19 results, showed a loss per share of 263.00c, which compares with EPS of 1,610.00c in the prior year.

Impala Platinum Holdings Limited: has ramped down all South African mining operations and placed them on care and maintenance. The Group has applied for permission to conduct limited smelting operations at Impala Rustenburg together with limited operations at its Springs refinery.

Sanlam Limited: has guided that new business volumes increased by more than 30.0% in the first part of 2020.

The Week Ahead

National | The Week Ahead Apr 5, 2020

Monday Cabinet Office to release survey on consumer trends for March. Japan Automobile Dealers Association to release new motor vehicle sales data by brand for March. Chairman of Japan Business Federation to hold news conference. Economy, Trade and Industry Ministry to hear opinions from .

Reference | The Week Ahead Mar 16, 2020

Wednesday Finance Ministry to release preliminary customs-cleared trade statistics for February. Japan posted a trade deficit for three straight months through January due to the global economic slowdown. The February result could show a further slowing of exports amid the new coronavirus outbreak. Japan .

Reference | The Week Ahead Mar 1, 2020

Monday Upper House Budget Committee to start question-and-answer sessions over budget draft for fiscal 2020. Opposition parties are expected to grill Prime Minister Shinzo Abe over the government’s initial handling of the new coronavirus outbreak that has been expanding in Japan. Finance Ministry to .

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Reference | The Week Ahead Feb 23, 2020

Monday IAEA Director-General Rafael Grossi to arrive for visit through Friday. Will hold meetings with Japanese officials and inspect crippled Fukushima No. 1 nuclear power plant. Japan Sumo Association to release latest rikishi rankings for Spring Grand Sumo Tournament starting March 8. Tuesday Agriculture, Forestry .

Reference | The Week Ahead Feb 16, 2020

Monday Cabinet Office to release preliminary gross domestic product data for October-December. Otsu District Court to hand down ruling over fatal accident in which car rammed into toddlers and killed two of them in Shiga Prefecture in May. Prosecutors to demand punishment for Satoshi .

Reference | The Week Ahead Feb 2, 2020

Monday Japan Automobile Dealers Association to release data on new motor vehicle sales in Japan for January. The Otsu District Court will hold the first hearing of a retrial in a case about the 2003 death of a hospital patient in which a former .

Reference | The Week Ahead Jan 26, 2020

Monday House of Representatives Budget Committee to hold question-and-answer sessions for two days on supplementary budget draft for fiscal 2020. Tuesday Business lobby Keidanren (Japan Business Federation) to hold two-day management-labor forum in Tokyo, effectively starting the annual spring wage talks. Representatives of the Japanese .

Reference | The Week Ahead Jan 19, 2020

Monday Diet to convene for 150-day regular session. BOJ to hold two-day monetary policy meeting. Polish Prime Minister Mateusz Morawiecki to begin three-day visit to Japan. Australian Open to start in Melbourne. From Japan, defending champion Naomi Osaka will be the women’s third seed. Tuesday .

Reference | The Week Ahead Jan 12, 2020

Monday Coming of Age Day national holiday. Prime Minister Shinzo Abe to visit United Arab Emirates. Abe is calling for efforts to stabilize region amid simmering tensions between Iran and United States. Five-day tour began Saturday in Saudi Arabia and will also take him .

Reference | The Week Ahead Jan 5, 2020

Monday First working day of 2020 for most companies and government offices. Prime Minister Shinzo Abe to visit Grand Shrines of Ise in Mie Prefecture, hold news conference. Tokyo Stock Exchange to hold first trading session of year after benchmark Nikkei average saw its .

Reference | The Week Ahead Dec 29, 2020

Monday Tokyo Stock Exchange to conduct year’s last trading session. The Nikkei average has added 19.1 percent since the start of 2020 and closed at 23,837.72 points on Friday, trading at its highest level in about 14 months. Annual Japan Record Awards to be .

Reference | The Week Ahead Dec 22, 2020

Monday Former Emperor Akihito to turn 86. The former emperor will mark his first birthday since he abdicated on April 30. He was succeeded by his eldest son, Emperor Naruhito, the following day. Prime Minister Shinzo Abe to leave for three-day China visit. Abe .

10/12/2020 Weather for the Week Ahead

Detailed weather forecast.

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Weather

Weather for the Week Ahead

09/12/2020

11/12/2020

Transcript

Hello. Cold Arctic air not just affecting the UK at the moment,

it’s also been affecting much of the US and Canada.

We’ve seen snowfall as far south as New Orleans over the past few days.

The area of blue, that Arctic air, pushes all way down the Gulf Coast.

As you can see, towards us.

But with the jet stream starting to strengthen,

over 200mph through this weekend,

we start to throw weather fronts our way into the air that we have

and with that a big risk of disruptive snowfall for Sunday.

Met Office amber warning in place across North Wales,

much of the Midlands.

It’s these areas where travel disruption is certainly likely,

anywhere between 5-20cm of snow possible.

The northern edge a little bit uncertain but we’ll see

snow get very close by into the morning,

the southern edge is going to be a mixture of rain

turning to snow, back to rain through the day.

The southernmost counties of England, this is where

we’ll see mainly rain, same to the south of Wales,

and a different issue here, it’s going to be the strength

of the wind, gales if not sever gale force winds,

that could cause disruption of its own.

Notice the snow across this central swathe of England

and Wales starts to peter out a little bit, turning

lighter and patchier into the afternoon,

far north of England, Scotland, Northern Ireland and

then a few wintry showers in the far north of Scotland,

most will have a dry and sunny Sunday. Pretty cold one, though,

temperatures struggling to get above freezing. Same where

you’ve got the snow in the south. Strong winds, they could get figures

into double digits.

Ice is then going to be the big risk as we go into Sunday night

as the patchy sleet and snow gradually clears

southwards. Some further snow showers in parts

of Scotland and Northern Ireland and a widespread frost.

Temperatures in the city centres like this

minus double digits through some parts of northern

England, north Wales and also parts of Scotland as well.

So a very cold start to Monday but we’re watching this

area of low pressure. For us, the good news is it’s driven

by a 200mmph jet stream. It looks like it’ll

strengthen and hit Spain, Portugal and France greatest.

We could get close enough to bring severe gales

to the south-east corner, rain which could turn to snow on

its western flank, only a small chance at the moment

but one to watch. Sleet and snow flurries could cause

problems in Pembrokeshire, Carmarthenshire

and also parts of Cornwall. Much of the country cold, sunny

We go into Tuesday, well, after a night of clear skies

and lighter winds there will be a severe, widespread frost,

especially where snow is on the ground, but Tuesday

itself slowly warming up through the day, dry, reasonably

sunny day for many, but changes afoot.

Now, we go into the middle part of the week with the Atlantic

starting to take over from Arctic air. This weather front

brings the change. Some snow on the hills to begin with,

turning to rain as that weather front pushes its way

eastwards, lying across eastern England to start

Wednesday. That will clear, sunshine out across eastern areas

in the afternoon. Frequent, heavy, thundery showers in

the west. Some of these could be sleet, hail and snow.

Snow though mainly over the higher ground. The air’s not

quite as cold as we started the week.

We continue with those winds coming off the Atlantic

but starting to go a bit more north-westerly by the

time we hit Thursday. There will be some very windy

conditions through Wednesday night into Thursday. Could be

severe gales, and it’s a sunshine, shower day for Thursday,

again some of those heavy with hail and thunder, sleet

and snow primarily over the hills. The second half of the

week not as cold as this weekend.

And then we go into next weekend. Friday and next weekend

looks like the winds will go back to north-westerly once again,

So it’s going to be cold to finish the week going into the weekend.

There will be wintry showers around, snow mainly over the hills,

not as bad as we’ll see on Sunday, the nights will be frosty

The Week Ahead: February 26, 2020

Greek debt swap—It’s on

On Friday, Greece issued the formal invitation to bondholders to exchange their Greek debt for new bonds and take an approximately 75% loss in the process. Without getting into all the nitty-gritty details, the key for us is the rate of creditor participation and what it implies for the risk of a credit default, which would trigger CDS (credit default swaps—insurance on Greek government debt) payouts, potentially rattling global markets’ nerves.

Beginning with the most benign scenario, if 90% of bondholders sign on, the exchange will be considered voluntary and CDS will not be triggered. In a darker scenario, if between 75% and 90% of creditors participate, collective action clauses (CAC’s) will be used to force the exchange on all bondholders, which would make the exchange involuntary and likely trigger CDS payouts. In the worst case, if less than 75% sign up, the entire debt swap will be scrapped, leaving the second Greek bailout in doubt and increasing the risk of a disorderly Greek default in a matter of weeks.

We have no way of knowing the extent of creditor participation, which makes this an extremely difficult event to call. For what’s it’s worth, the lead IIF negotiator indicated on Friday he was ‘quite optimistic’ about a majority of bondholders approving the deal, leaving it open whether it reaches the 75% minimum threshold. In terms of timing, the Greek plan calls for creditors to accept the swap by March 11, or potentially be subject to CAC’s.

If the Greek debt exchange triggers CDS payouts, we think there is potential for another wave of financial sector turmoil. The net amount of Greek CDS outstanding (firms who have bought minus firms who sold Greek CDS) is small at around EUR 3.2 bio. But that figure masks the gross amount of Greek CDS obligations outstanding, which is around EUR 70 bio. The risk is that financial sector players react with counterparty panic, unsure of which institutions are on the hook and for how much, possibly leading to a wider market seizure. Stay tuned to the headlines and watch for the participation rates (the total amount of Greek debt open for exchange is EUR 206 bio).

G-20 meeting, ECB LTRO, and month-end ahead

This weekend will see G-20 finance officials gather in Mexico to discuss global issues and expectations are relatively low for any meaningful initiatives. The focus for markets will be on getting new capital commitments for the IMF to strengthen its capacity to support Europe. The IMF has indicated it’s seeking an additional USD 500 bio in lending capacity, while the 17 euro-area nations have committed to around USD 200 bio in new capital.

We think there is room for some disappointment coming out of the G20 if significant fresh capital is not committed to the IMF. US, Chinese and Japanese officials, among others, have indicated they want to see further measures from the Europeans themselves before committing additional support. For the US, in particular, providing further aid to the IMF to support Europe is political suicide, so we would certainly not expect any US capital commitments. If the G20 balks and no major capital commitments are made, risk sentiment may get off to a rocky start to the week, but if incoming economic data continues positively, risk appetite should ultimately rebound.

On Wednesday at 0515ET/1015GMT, the results of the ECB’s second (and, for now, final) Long-Term Refinance Operation (LTRO) will be announced. Markets are expecting Euro-area banks to draw around EUR450 bio in fresh 3-year financing, slightly less than the EUR 489 bio taken up at the Dec. 22 LTRO. Should banks take up less than EUR 400 bio, we think European government bond markets may be disappointed and we could see yields start to move higher again, which might take some of the wind out of the euro’s sails.

If bank demand is as expected, EU debt markets should remain resilient. But there, too, is the risk of a buy-the-rumor/sell-the-fact reaction, where bonds have rallied in advance of the LTRO and are now ripe for profit-taking. As well, following approval of the second Greek bailout and the LTRO, what’s the next source of good news to look forward to out of the EU debt crisis, again setting up the potential for a EUR reversal.

Next week also sees the usual month-end portfolio rebalancing flows and we expect to see a bias toward further USD-selling, typically culminating each day in the hours leading up to the 1600GMT/1100ET London fixing. The strongest dollar-sell indications are against the commodity currencies (AUD, CAD and NZD), but also against GBP, CHF and JPY. For the JPY, however, as we discuss below, we would not look to sell USD/JPY .

EUR short squeeze continues; JPY reversal extends

EUR continued to push higher across the board, as the large short-EUR position continues to be squeezed out. CFTC data indicate the EUR/USD net-short position was further reduced to 142K from 148K in the prior week, but the data only covers up to last Tuesday, and undoubtedly shorts were further reduced into the end of the past week. However, the net-short reduction is only down from recent all-time highs of around 170K, so it looks like there is still plenty of room to go.

Additionally, the EUR has been supported by more positive developments in the EU debt crisis, anticipation of the LTRO, and some not so bleak data. Still, we find it difficult to enthusiastically embrace the single currency in light of stagnant growth prospects, especially at levels just below 1.3500. Instead, our preference would be to use pullbacks into the 1.3250/1.3300 (just above the top of the daily cloud) area as a potential long-entry zone, and we remain mindful of the headline risks facing EUR. On the upside, beyond the 1.3500/10 psychological/option resistance/38.2% Fibonacci retracement of the 1.4940-1.2626 decline, the weekly Kijun line comes in at 1.3586.

Last week, we cautioned that JPY-weakness was likely to continue, but the desired pullback in USD/JPY or JPY-crosses never materialized. We think there is still more room to go, but we’re also finishing the week around key resistance levels. In USD/JPY , the top of the weekly Ichimoku cloud is at 80.95, and we’re still reluctant to chase the pair higher into this key resistance. As well, the US/Japanese 2-year interest rate spread still suggests a USD/JPY rate closer to 78.60/70, so we would suggest patience and continue to look to enter USD/JPY longs on pullbacks into the 78.50/79.50 area.

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