Rand volatile after Gordhan sacking; bonds await eurozone inflation

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● European stocks track retreat in S&P 500 futures and soft Asian session
● Bund yields firm and euro steady ahead of eurozone inflation data
● South African rand down 8 per cent on week after finance minister sacked
● Energy stocks pressured as oil prices slip
● Gold a touch softer as the dollar index nudges up


Hot topic
The last day of the quarter sees a rash of national and regional consumer prices data released, with traders keen to gauge the extent to which inflation trends are consistent with the predominantly highly accommodative monetary policies of major central banks.

Of particular interest is the eurozone, where the “flash” harmonised index of consumer prices (HICP) for February is due for publication at 10:00 BST.

Analysts expect the annual HICP to dip from 2 per cent in January to 1.8 per cent last month, a pull back that may help the European Central Bank to maintain its negative interest rate policy and ongoing quantitative easing.

A report from Reuters this week said ECB members wished to challenge investors’ perception that the monetary guardian was looking to tighten policy anytime soon, news which put the euro and government bond yields under pressure.

Ahead of the inflation data the euro is barely changed at $1.0677 and the benchmark 10-year German Bund yield, which moves opposite to the bond price, is steady at 0.34 as the market also absorbs news that German February retail sales rose 1.8 per cent month-on-month.

What to watch
A busy day for economic reports is completed by a flurry of data out of the US.

Personal income and spending are due for release at 13:30 BST alongside a closely watched prices gauge, the PCE deflator — both covering February.

The Chicago purchasing managers’ index for March is on the slate for 14:45 BST, followed quarter of an hour later by the University of Michigan consumer sentiment index, also surveying this month.

As traders wait for the data the policy-sensitive 2-year US government bond yield is steady at 1.29 per cent and the 10-year benchmark Treasury is also barely changed at 2.42 per cent.

The dollar index (DXY), a measure of the US currency against a basket of global peers, is adding 0.1 per cent at 100.51, with the greenback underpinned by Thursday’s news that US fourth-quarter GDP was revised up to an annualised 2.1 per cent. The DXY is eyeing its first four-day winning streak since mid-February.

Equities
Global stocks began the session with an eye to record their best start to a year since 2013, with the MSCI World Index up 6.2 per cent in the first quarter.

Helping power worldwide gains is the rally on Wall Street, where the S&P 500 is up 5.8 per cent so far in 2017, touching a record high of 2,396 in the process, amid optimism that the Trump presidency can boost corporate profitability.

But the mood is cautious as March draws to a close. Futures indicate the S&P 500 will slip 6 points to 2,362 and this is contributing to a soft showing in other benchmarks.

The pan-European Stoxx 600 index is off 0.2 per cent as London’s FTSE 100 slip 0.4 per cent with shares in commodity groups struggling in response to lower oil and metal prices.

In Asia, Japan’s benchmark Topix fell 1 per cent, having earlier gainedground as exporters were encouraged by a 0.8 per cent drop in the yen on Thursday — its biggest one-day fall since the start of this month.

Hong Kong’s Hang Seng index lost 0.7 per cent and Australia’s S&P/ASX 200 shed 0.5 per cent, with banking stocks coming under pressure as the country’s prudential watchdog tightened mortgage-lending rules for interest-only borrowers.

The Shanghai Composite gained 0.35 per cent, taking the Chinese benchmark off a six-week low following a four day losing streak that came amid concerns that Beijing was draining liquidity from the financial system to suppress speculative excess.

Although shares are not seen as particularly sensitive to economic data, some economy watchers are likely to have taken heart at an official survey showing activity in China’s manufacturing sector climbed to its highest since 2012.

Forex
South Africa’s rand is grabbing the currency headlines as it stumbles 1.2 per cent to 13.4559 per dollar in the wake of the nation’s finance minister, Pravin Gordhan, being dismissed on Thursday by President Jacob Zuma.

The currency has shed a cumulative 8.3 per cent this week and is on track for a fifth straight day of declines as investors again fret about a lack of stability in Pretoria.

The Japanese yen is 0.1 per cent stronger at ¥‎111.80 following data on Friday showing headline inflation and industrial production grew more than expected in February but mostly eased from the previous month, while the jobless rate fell to its lowest since June 1994.

Sterling is down just 0.1 per cent to $1.2457 as investors await UK fourth-quarter GDP data due at 09:30 BST.

Commodities
Oil prices are cooling after solid gains over the previous two sessions.
Brent crude, the international benchmark, is down 0.3 per cent at $52.78 a barrel, while West Texas Intermediate, the main US contract, is off 0.1 per cent at $50.30. Thursday was the first time since March 10 that the two benchmark prices had concurrently traded above $50.

Gold is down 0.1 per cent at $1,242 an ounce as it struggles in the face of a firmer dollar index.

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