8 Jan

Daily Market Report 8 Jan

Key Insights

SA Challenges

  • Municipalities owe Eskom R109.4bn, risking the unbundling of its distribution company. Gauteng MEC Maile denies bankruptcy risks but highlights inefficiencies and wasteful spending.
  • Rising fiscal risks and weak service delivery hinder investor confidence.

Global Macro

  • US: Strong labour data reduced Fed rate cut expectations to just one for 2025, supporting USD strength.
  • UK: Gilt yields hit 1998 highs, reflecting inflation and fiscal risks tied to elevated borrowing.

Market Insight

  • ZAR: Trading at 18.7250, pressured by strong USD and domestic fiscal concerns. Resistance at 18.9100, support at 18.6050.
  • SA Bonds: 10-year spread to US Treasuries narrowed to 436bps, raising risks of a correction higher.

Strategic Focus

  • Immediate reforms at municipal and Eskom levels are critical for fiscal sustainability.
  • Monitor US payroll data and Fed minutes for USD and global bond market direction.

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  • Exchange Rate Risk arises when an organisation conducts business in multiple currencies, either through exports and imports, or through foreign operations.
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