The rand was a touch softer in Wednesday morning trade despite stronger than expected US data released on Tuesday, when SA markets were closed for Workers' Day.
"We are playing catch-up on other markets which were open yesterday. The US manufacturing index was better than expected and that could also be reflected in our Purchasing Managers' Index (PMI), but for the moment we are a bit softer," a local trader said.
The SA PMI will be released at 11:00.
At 08:44 local time the rand was bid at R7.7358 to the dollar from its previous close of R7.7283. It was bid at R10.2133 to the euro from R10.2270 before, and at R12.5411 against sterling from R12.5305 previously.
The euro was bid at US$1.3213 from its previous close of $1.3234.
RMB said in its morning commentary that it had been a positive start to the week, with good PMI figures from the US and China, a drop back in Spanish and Italian bond yields and the Dow hitting a fresh 4-year high.
"The US ISM (equivalent to our PMI) manufacturing index's surge to 54.8 in April from 53.4 in March eased fears that the world's largest economy could be set for a 2011-style slump, suggesting that after a March and April siesta, the economy is accelerating again. We need a lot more data to confirm the outlook but in the unlikely event of a good non-farm payroll employment report on Friday, expect equities and the rand to rally hard.
"The new buzzword in town is growth. A wash of commentary suggests that austerity measures in Europe are self-defeating in that they are leading to economic contraction, which makes meeting the budget harder and therefore a possible spiral into oblivion. According to the new thinking, we need less focus on austerity and more on growth. Newly elected officials across Europe love the idea, the Germans hate it. The last word will go to the bond markets. So far the reaction has been surprisingly good: despite the two-notch downgrade Friday and weak GDP data on Monday, Spanish 10-year yields have backed off aggressively from the 6 percent level. For all the negative talk, Spain is not collapsing.
"The data diary will heat up today, with PMI figures from those countries that were on holiday yesterday, Eurozone unemployment figures and US factory orders and ADP employment data. The calendar will become even busier as the week progresses, with the ECB meeting tomorrow, payrolls data on Friday, and the Greek and French elections on Sunday," the bank noted.
Absa Capital said it would be a relatively quiet day on the domestic data calendar following yesterday's public holiday in SA.
"However, the main focus will be on the release of the PMI later this morning (11:00 am SA time) where we will be looking for more insight into how SA's manufacturing sector is faring. Although we forecast a small decline in the index from 55.1 in March, we expect the PMI to have remained above its neutral level of 50 in April, indicating a modest expansion in manufacturing production.
"Global risk appetite was boosted by yesterday's encouraging US manufacturing data, and given that this morning's Chinese data also showed further improvement in April, it suggests that the risk-on trading environment is likely to persist today. Asian equity markets are in the green this morning, which, together with last night's positive finish on Wall Street and the retreat in safe-haven assets such as US 10-year bonds and the JPY, provides evidence that global sentiment is indeed upbeat. We believe the risk lies in extended rand strength today, especially if this morning's local manufacturing data also prove to be encouraging because such an outcome would help the rand from an overall GDP differential perspective. The short covering in the rand in recent weeks reinforces our view that the rand will end the month around 7.64/USD and 10.08/EUR," the bank said.
R157S a touch softer, in line with rand
The benchmark R157s displayed a slightly weaker bias in early morning trade on Wednesday, largely on the back of the rand. Other major bonds were untraded.
At 08:50, the benchmark R157 bond was at 6.465 percent from its previous close of 6.460 percent. The R207 was bid at 7.575 percent and offered at 7.545 percent from a previous close of 7.555 percent and the R186 was offered at 8.200 percent from its close of 8.165 percent.