
<p>JOHANNESBURG (Reuters) &#8211; South Africa’s rand held steady in early trade on Friday as a pause in the global selloff of risk assets, triggered by panic over the coronavirus and tumbling oil prices, gave investors a chance to reassess positions ahead of the weekend.  </p>



<p>As of 0645 GMT, the rand was 0.69% firmer at 16.4500 per dollar, compared with Thursday’s session-low of 16.6150.  </p>



<p>The mood in financial markets improved somewhat on Friday, with Asian equities staging a recovery and U.S. stocks futures pointing to a firmer start on Wall Street as attention turned to a U.S. stimulus package.  </p>



<p>The turnaround came after assets across the developed and emerging markets saw record sell-offs on Thursday as investors scrambled for safe-havens even after the European Central Bank announced stimulus measures to fight the economic fallout from the coronavirus outbreak. </p>



<p>Locally, stocks recorded their worst single-day fall in more than 22-years in the previous session, bonds saw their biggest selloff on record, and the rand hovered around the 16.50 mark, a level seen as a bearish technical gauge, especially with dollar back in vogue. </p>



<p>The U.S. Federal Reserve’s move to pump $1.5 trillion of liquidity into the banking system quickened the flight to the greenback, but Friday was likely to see some profit-taking, traders said. </p>



<p>“The rand has managed to make back some modest ground in early trade. Whether or not this can be sustained will depend on how risk conditions hold up as the markets remain fixated on coronavirus headlines,” economists at ETM Analytics said in a note.  </p>



<p>Bonds remained on the ropes with the yield on the government issued 2030 paper up 6 basis points at 9.855%. </p>



<p>(Reporting by Mfuneko Toyana; Editing by Aditya Soni)</p>



<p>This article was fisrt published on Reuters Africa <a href="https://af.reuters.com/article/investingNews/idAFKBN210102-OZABS">https://af.reuters.com/article/investingNews/idAFKBN210102-OZABS</a> and is republished with its permission.</p>


South Africa’s rand steady as coronavirus-induced sell-off pauses


<p><strong>Key Points</strong></p>



<ul><li>The week has seen a deluge of headlines on emergency monetary and fiscal policy action from central banks and governments around the world.</li></ul>



<ul><li>Another reason for Friday’s market moves could be that some investors believe they’ve bottomed out.</li></ul>



<ul><li>Some are seeing the historic sell-off as an opportunity to capitalize on low stock valuations.</li></ul>



<p>Markets are set for a wild day of trading on Friday as volatility takes hold following a historic sell-off around the world.</p>



<p>While Thursday’s stock market was fueled by the rapid global spread of the coronavirus pandemic, and U.S. President Donald Trump’s announcement of <a href="https://www.cnbc.com/2020/03/12/lagarde-on-trump-travel-ban-doubt-very-much-that-diseases-have-passports.html">travel restrictions from Europe</a>, markets today are painting an inconsistent and chaotic picture.</p>



<p>Dow futures started in the red but reversed course during the morning to point to an <a href="https://www.cnbc.com/2020/03/12/futures-stock-market-coronavirus-concerns.html">opening gain of more than 700 points</a>. The benchmark on Thursday dropped 10% to post its worst single-day loss since “Black Monday” in 1987.</p>



<p><a href="https://www.cnbc.com/2020/03/13/european-stocks-set-for-mixed-open-after-historic-sell-off.html">European stocks</a> jumped more than 4% at the open after the pan-European Stoxx 600 posted its worst day in history on Thursday, but proceeded to cut their gains in half within the first hour of trading before rebounding once again.</p>



<p><a href="https://www.cnbc.com/2020/03/13/asia-markets-wall-street-coronavirus-stimulus-measures-in-focus.html">Asian shares</a> continued to tumble across the board, but <a href="https://www.cnbc.com/quotes/?symbol=.AXJO">Australia’s stocks</a> rebounded from an 8% decline to close 4.42% higher.</p>



<p>This move in Australian shares came after the government unveiled a $17.6 billion stimulus package as its stock index careened into bear market territory — but responses by other monetary policymakers have left markets underwhelmed.</p>



<h2 class="wp-block-heading">Policy inconsistency</h2>



<p>The week has seen a deluge of headlines on emergency monetary and fiscal policy action from central banks and governments around the world. However, the apparent lack of a coordinated global response is seemingly leaving investors scratching their heads.</p>



<p>Having already announced a 50 basis point cut to interest rates on March 3, the U.S. Federal Reserve on Thursday announced a plan to <a href="https://www.cnbc.com/2020/03/12/fed-to-pump-more-than-500-billion-into-short-term-bank-funding-expand-types-of-security-purchases.html">pump $1.5 trillion into the financial system</a> in a bid to combat potential freezes arising from the virus.</p>



<p>The European Central Bank (ECB) announced a 120 billion euro ($135.28 billion) expansion to its asset purchase program, but <a href="https://www.cnbc.com/2020/03/12/european-central-bank-stimulus-package-amid-coronavirus.html">surprised markets by opting against</a> a widely anticipated 10 basis point interest rate cut, which sent European markets deeper into the red Thursday.</p>



<p>The Bank of England earlier this week announced a 50 basis point cut to interest rates, while the British government revealed a $39 billion spending package which included funds to mitigate the economic impact of the pandemic.</p>



<h2 class="wp-block-heading">Violent rebound?</h2>



<p>Another reason for Friday’s market moves could be that some investors believe they’ve bottomed out. Global investment research firm BCA Research said Friday that its equity sentiment indicators had collapsed to levels recorded before significant market rebounds, such as those which materialized in March 2009 and October 2002.</p>



<p>“This is not a guarantee that the market will rebound in the coming days, but it suggests that we have now seen at least three quarters of the selling pressure,” BCA Bank Credit Analyst Mathieu Savary said in a research note Friday morning, adding that the data also indicates the market could now “violently rebound on any positive news.”</p>



<p>Market sentiment has hit the floor because investors are so disappointed by the response of policymakers so far, he said.</p>



<p>“Paradoxically, this growing bear market is exactly what is needed to force action from fiscal and monetary authorities,” Savary said, adding that this increases the likelihood of large fiscal packages which provide a sharp rebound in the context of “bombed out” sentiment, though the “durability of the rebound remains tenuous.”</p>



<h2 class="wp-block-heading">‘A special kind of fear’</h2>



<p>Some are seeing the historic sell-off as an opportunity to capitalize on low stock valuations.</p>



<p>Jeff Henriksen, CEO of Thorpe Abbotts Capital, told CNBC on Friday that he had been buying all of this week, based on a long-term “value-oriented” approach.</p>



<p>Thorpe Abbots’ base case is that while the economy will take a sharp hit, the impact will be temporary unless there is a “huge credit crunch,” though Henriksen suggested that monetary and fiscal policymakers will have to do more in the coming days and weeks.</p>



<p>“It is a special kind of fear that is really gripping people right now, and I think it is creating dislocations in markets that we look at,” he told CNBC’s “Squawk Box Europe.”</p>



<p>“I never thought that we would see generational lows like we did in 2008/9, in terms of valuations, in my lifetime again, but we are starting to see that.”</p>



<p>While reluctant to speculate on whether the markets have bottomed out, Henriksen said there were opportunities to buy at big discounts.</p>



<p>“In the last week, I have seen more interesting opportunities than I have seen in a very long time,” he said.</p>



<p>“Investors, if they look through all this, can find some great companies at really bargain level prices.”</p>



<p>This article was first published on CNBC <a href="https://www.cnbc.com/2020/03/13/heres-whats-driving-market-volatility-after-the-global-stock-rout.html">https://www.cnbc.com/2020/03/13/heres-whats-driving-market-volatility-after-the-global-stock-rout.html</a> and is republished with its permission.</p>


Here’s what’s driving market volatility after the global stock rout

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<p>Christine Lagarde gave her first speech as the European Central Bank President. Lagarde specifically focused on the changing environment of the world economy and how Europe needs to consider its place and reset its ambitions.</p>


ECB President Lagarde addresses changing global economic environment

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<p>The European Central Bank failed to announce the official key interest rate figure but instead suggested that a rate cut would occur in the near future. President Mario Draghi emphasised a need for more stimulus following the lack of growth from the package put in place following the sovereign debt crisis of 2011.</p>


ECB hint at rate cut for further euro zone stimulus

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<p>The European Central Bank (ECB) says it expects rates to stay at present or lower levels at least through the first half of 2020. The bank’s Governor, Mario Draghi made this known while announcing the decision to hold interest rates. Chinonye Nnewuihe, Senior Analyst at Meristem Securities joins CNBC Africa for more.</p>


ECB holds rates, alters forward guidance

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<p>The European Central Bank is leaving its benchmark interest rates unchanged. President Mario Draghi expressed confidence in the euro zone inflation rally which is expected to pick up towards the end of the year. At a press conference of the monetary policy decision he had this to say.</p>


Mario Draghi on why the ECB kept rates unchanged

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<p>The European Central Bank says it will halve its bond purchases to 15 billion Euros per month from October and end the purchases at the end of the year. Meanwhile, its president, Mario Draghi, warns of the impact of the rising trade dispute between the United States and other countries on the global markets. Uchenna Minnis, Chief Market Analyst at Eagle Global Markets joins CNBC Africa to discuss the impact of the ECB’s decision on emerging markets.</p>


Impact of ECB’s decision on emerging markets

<p>By Francesco Canepa</p>
<div class="DPSlot_container_2dHIN DPSlot_inline_1oeo6">FRANKFURT, Dec 11 (Reuters) &#8211; The European Central Bank held on to its holding of Steinhoff’s bonds last week even as they sold off and were downgraded to junk amid an accounting scandal at the South African retailer, ECB data showed on Monday.</div>
<p>Steinhoff, whose brands include Britain’s Poundland, disclosed “accounting irregularities” on Wednesday and parted ways with its chief executive, triggering a collapse of its shares and bonds and a downgrade by ratings agency Moody‘s.</p>
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<div id="dpslot_native_9902785442259426_USL8N1OB4A9" data-google-query-id="CLOY49WihtgCFY0D0wodOWQLfA">The ECB was among those nursing losses, having bought Steinhoff’s bonds last summer as part of its 2.55 trillion euros ($3.01 trillion) money-printing programme aimed at boosting inflation in the euro zone.</div>
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<p>The bond still featured on a list of ECB holdings published on Monday. While its size was not disclosed, it was likely to be a small part of the ECB’s 130 billion euros portfolio of corporate debt, which is built in proportion to the amounts outstanding in the market.</p>
<p>These purchases have been criticised by European lawmakers, academics and activists for being too risky for a central bank both from a financial and reputational point of view.</p>
<p>“The Steinhoff scandal raises concerns about the lack of oversight regarding exactly what activities the ECB’s corporate bond programme is subsidising,” said Stanislas Jourdan, who coordinates a campaign calling for the ECB to distribute money to people instead.</p>
<p>Moody’s cut the company’s credit rating last Thursday by four notches to B1, deep into speculative territory, and raised concerns about its governance.</p>
<p>The ECB can only buy bonds with an investment-grade rating but does not have to sell them if they are downgraded below that threshold.</p>
<div>If Steinhoff’s debt was to be converted into equity, however, the ECB would find itself in a conundrum as the rules that it has given itself only allow for owning debt.</div>
<p>The Steinhoff bond, issued in July and due to mature in 2025, traded at 47 percent of their face value on Monday despite a small rebound. ($1 = 0.8478 euros) (Editing by Matthew Mpoke Bigg)</p>

COVID-19: South Africa eases lockdown to revive battered economy

European Central Bank retains Steinhoff debt despite scandal

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<p>The last couple of weeks in the markets have been pigeonholed by the escalating tensions between the U.S. and North Korea which has culminated in repeated stints of risk-off trading.</p>


ECB holds policy meeting, all eyes on Mario Draghi

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<p>The euro traded lower after a previous high against the US dollar, after media reports suggested that markets misinterpreted comments from the president of the European Central Bank, Mario Draghi.</p>


Euro rallies following Draghi speech

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<p>Goldman Sachs has six trades designed to capitalise on its forecast for faster economic growth and a stronger dollar, coupled with more uncertainty.</p>
<p>According to a Goldman note issued on Friday, global economic growth will likely accelerate, spurred by fiscal stimulus across the world and continued quantitative easing from the European Central Bank (ECB) and the Bank of Japan (BOJ), but offset by more uncertainty in politics and on Federal Reserve tightening.</p>
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<p>That was likely to spur a stronger dollar and higher inflation across developed markets, as well as better fundamental support for select emerging markets, the bank said, adding that European dividends were set to outperform.</p>
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<p>Goldman suggested six trades to play those themes.</p>
<p>1. Go long <a href="http://data.cnbc.com/quotes/.DXY" target="_blank" class="inline_quotes" data-gdsid="586968" data-inline-quote-symbol=".DXY">the dollar</a> against the euro and the pound to play the divergence in economic performance as well as the political risks on both sides of the pond.</p>
<p>&#8220;While the solid shape of the U.S. economy and the prospect of some fiscal stimulus make a more compelling case for a tighter stance of monetary policy and a stronger dollar over the coming months, the recent political gyrations in Europe will continue to weigh on euro and sterling,&#8221; the bank said. &#8220;Brexit negotiations in the U.K. have not yet started and uncertainty around the outcome remains elevated.&#8221;</p>
<p>Goldman said it did not believe sterling was cheap yet, with a 25-40 percent drop from pre-Brexit levels needed to rebalance the U.K.&#8217;s external position. The U.K. has a large current account deficit of around 6 percent of gross domestic product (GDP); that must be financed with money from overseas, which may further pressure sterling.</p>
<p>At the same time, uncertainty over upcoming elections in euro-area countries will weigh on the single-currency, according to the note.</p>
<p>In a separate note dated Sunday, Goldman lowered its <a href="http://data.cnbc.com/quotes/GBP1M%3D" target="_blank" class="inline_quotes" data-gdsid="618715" data-inline-quote-symbol="GBP1M=">sterling</a> forecasts to 1.20, 1.18 and 1.14 on a three-, six- and 12-month basis respectively. The sterling was fetching $1.2349 at 9:27 a.m. HK/SIN.</p>
<p>It also set its 12-month target for <a href="http://data.cnbc.com/quotes/EURUSD%3D" target="_blank" class="inline_quotes" data-gdsid="87935536" data-inline-quote-symbol="EURUSD=">the euro</a> at $1.00. At 9:28 a.m. HK/SIN, the euro was fetching $1.0602.</p>
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<p>2. Go long the dollar/yuan to play a weakening Chinese currency, Goldman said, advising using the 12-month non-deliverable forward contract with an initial target of 7.30, compared with current levels around 7.07.</p>
<p>Goldman said that with dollar appreciation set to continue through 2017, the dollar/yuan would need to rise to keep the yuan&#8217;s level against its trade basket stable, carrying a risk of re-igniting capital outflows from the mainland.</p>
<p>It raised its three-, six- and 12-month <a href="http://data.cnbc.com/quotes/CNY%3D" target="_blank" class="inline_quotes" data-gdsid="612178" data-inline-quote-symbol="CNY=">dollar/yuan</a> forecasts to 7.00, 7.15 and 7.30 respectively, from 6.70, 6.80 and 7.00 previously. It also now expected the pair at 7.60 at end-2018, compared with its forecast of 7.30 previously.</p>
<p>3. Goldman advised earning &#8220;good carry&#8221; in emerging markets and hedging the risk from China and a declining yuan.</p>
<p>To play that theme, it said to go long an equally weighted basket of <a href="http://data.cnbc.com/quotes/BRL%3D" target="_blank" class="inline_quotes" data-gdsid="615261" data-inline-quote-symbol="BRL=">Brazil&#8217;s real</a>, <a href="http://data.cnbc.com/quotes/RUB%3D" target="_blank" class="inline_quotes" data-gdsid="614073" data-inline-quote-symbol="RUB=">Russia&#8217;s ruble</a>, <a href="http://data.cnbc.com/quotes/INR%3D" target="_blank" class="inline_quotes" data-gdsid="613630" data-inline-quote-symbol="INR=">India&#8217;s rupee</a> and <a href="http://data.cnbc.com/quotes/ZAR%3D" target="_blank" class="inline_quotes" data-gdsid="610789" data-inline-quote-symbol="ZAR=">South Africa&#8217;s rand</a>, while at the same time shorting an equally weighted basket of <a href="http://data.cnbc.com/quotes/KRW%3D" target="_blank" class="inline_quotes" data-gdsid="611656" data-inline-quote-symbol="KRW=">South Korea&#8217;s won</a> and the <a href="http://data.cnbc.com/quotes/SGD%3D" target="_blank" class="inline_quotes" data-gdsid="611926" data-inline-quote-symbol="SGD=">Singapore dollar</a>.</p>
<p>The &#8220;good carry&#8221; candidates – the real, ruble, rupee and rand – offer generous yields and fundamentals were improving, according to the note.</p>
<p>&#8220;The &#8216;Trump tantrum&#8217; of the past week put meaningful pressure on the four currencies, creating more attractive entry points, and – given that both India and South Africa were net oil importers, while Russia and Brazil were net oil exporters – the basket limited exposure to oil risk,&#8221; it said.</p>
<p>&#8220;On the short side, the won and Singapore dollar feature low carry, subdued inflation and – given both their high exposure to Chinese demand and their direct competition with China in the export market – allow us to hedge against the left tail risk that a build-up in Chinese debt results in a sharp depreciation of the yuan.&#8221;</p>
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<p>4. Go long emerging market equities with insulated exposure to growth, specifically Brazil, India and Poland, without hedging currencies, Goldman suggested.</p>
<p>&#8220;We remain positive on the emerging market ex-China growth recovery story heading into 2017 and see a good entry point in expressing this view via emerging market equities,&#8221; the bank said. &#8220;Brazil, Poland and India offer an &#8216;insulated exposure&#8217; to the emerging market growth recovery story, without being particularly exposed to China growth or U.S. trade policy.&#8221;</p>
<p>5. Play the &#8220;reflation&#8221; theme by going long <a href="http://data.cnbc.com/quotes/US10YTIP" target="_blank" class="inline_quotes" data-gdsid="23200538" data-inline-quote-symbol="US10YTIP">U.S. 10-year TIPS</a>, or Treasury Inflation-Protected Securities, &#8220;break-even&#8221; inflation and long euro 10-year inflation via swaps, it said.</p>
<p>Goldman expected that low base-effects from commodity markets would push up headline consumer inflation figures across the major advanced economies. At the same time, inflationary pressures would get stoked by large public sector spending in Japan, China, the U.S. and Europe, it wrote.</p>
<p>Higher inflation was likely to push up bond yields, a factor that would push up the value of inflation-protection related securities.</p>
<p>6. Go long <a href="http://data.cnbc.com/quotes/.STOXX50E" target="_blank" class="inline_quotes" data-gdsid="567938" data-inline-quote-symbol=".STOXX50E">Euro Stoxx 50</a> 2018 dividends via a swap trade, it said.</p>
<p>&#8220;Equities may not benefit from the reflation as much as we would like, owing to already elevated valuations and rising rates capping upside,&#8221; the Goldman note advised. &#8220;In addition, equities have been, and are likely to stay, volatile owing to political risk and elevated uncertainty,&#8221; it said. &#8220;Dividends swaps are less high beta than equities but also have some sensitivity to better growth.&#8221;</p>
<p>It expected more than 10 percent potential return from its swap play, higher than the likely upside for the equity market.</p>
<p><em>—By CNBC.Com&#8217;s Leslie Shaffer; Follow her on Twitter</em> <a href="https://twitter.com/LeslieShaffer1" target="_self" class="inline_asset">@LeslieShaffer1</a></p>
<p>Follow CNBC International on <a href="https://twitter.com/cnbci" target="_blank" title="https://twitter.com/cnbci" class="inline_asset">Twitter</a> and <a href="https://www.facebook.com/cnbcinternational" target="_blank" title="https://www.facebook.com/cnbcinternational" class="inline_asset">Facebook</a>.﻿</p>
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<p> </p>


European Central Bank

South Africa’s rand steady as coronavirus-induced sell-off pauses

Here’s what’s driving market volatility after the global stock rout

ECB President Lagarde addresses changing global economic environment

ECB hint at rate cut for further euro zone stimulus

ECB holds rates, alters forward guidance

Mario Draghi on why the ECB kept rates unchanged

Impact of ECB’s decision on emerging markets

European Central Bank retains Steinhoff debt despite scandal

ECB holds policy meeting, all eyes on Mario Draghi

Euro rallies following Draghi speech

Goldman Sachs six trade ideas for 2017

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European Central Bank

South Africa’s rand steady as coronavirus-induced sell-off pauses

Here’s what’s driving market volatility after the global stock rout

ECB President Lagarde addresses changing global economic environment

ECB hint at rate cut for further euro zone stimulus

ECB holds rates, alters forward guidance

Mario Draghi on why the ECB kept rates unchanged

Impact of ECB’s decision on emerging markets

European Central Bank retains Steinhoff debt despite scandal

ECB holds policy meeting, all eyes on Mario Draghi

Euro rallies following Draghi speech

Goldman Sachs six trade ideas for 2017

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