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Zambia Market Watch – ZAR takes it on the chin in thin trade

December 29, 2021by Nicholas Kabaso

  • The markets remained thin yesterday which exacerbated price action across the asset classes. Fund managers continued to square off positions into the end of 2021 and those still at their desks are planning for a macro backdrop that is significantly different in 2022 than it was at the start of 2021.
    Inflation remains the key macro driver at the moment with the US, Latin America, the EU, Africa and some of Asia all fighting the monster with tighter monetary policy or at least the expectation of tighter monetary policy in 2022. This is having a significant impact on assets across the board with most bond markets continuing the trend of bearish flattening, while in equities investors are seeking companies who have the ability to pass on any future price increases and those who have strong dividend growth potential.
    Gold is anchored above the $1800.00/oz mark this morning trading in a tight range. The yellow metal is currently taking direction in the short term from movements in the US Treasury market as tactical investors look to squeeze out the last bit of alpha ahead of the year end close.  The front end of the US Treasury curve was strongly offered yesterday with the 2yr hitting almost a 2yr high with levels last seen in March 2020 recorded. This morning we have the 2yr changing hands at 0.7402% with an intra-day high of 0.7480% noted.
    Moving over to the FX markets holiday thinned trade was certainly a factor yesterday. The dollar regained some of its shine while certain emerging market currencies sold off sharply. The ZAR shed just over 20 cents on the day while the TRY was offered for most of the session.
    Those present at their desks will be keeping a close eye on geopolitical developments with tensions between Russia and the United States front and centre. CNBC has reported the following – U.S. and Russian officials will hold security talks next month amid an alarming Russian military buildup on its shared border with Ukraine. The Jan. 10 meeting will focus on arms control agreements, NATO and Russian military activity as well as rising tensions over Ukraine. The meeting will be held as part of the Strategic Security Dialogue that President Joe Biden and Russian President Vladimir Putin announced during their June summit in Geneva. “When we sit down to talk, Russia can put its concerns on the table, and we will put our concerns on the table with Russia’s activities as well. We will adhere to the principle of ‘nothing about our Allies and partners without our Allies and partners, including Ukraine,’” a National Security Council spokesperson told NBC News in a statement.
    The day ahead will see Uganda placing bonds, while Kenya and Morocco are potentially releasing their 3Q GDP stats. Out of the US, we have Wholesale Inventories and Pending Home Sales to contend with.

Nicholas Kabaso

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