SOUTH AFRICA: DA Stays Committed To Coalition Pact But Red Lines Remain
- Democratic Alliance (DA) Federal Leader John Steenhuisen yesterday confirmed that his party remains committed to the Government of National Unity (GNU), assuaging earlier concerns that the coalition could be on the brink of collapse, but also accused the African National Congress (ANC) of excluding its coalition partners from decision-making and warned of several red lines that it must respect. While it appeared that a compromise on the Expropriation Act was on the table, Steenhuisen demanded amendments to the National Health Insurance (NHI) Bill or else his party could withdraw support for Budget 2025, which will be tabled next month. He also insisted that the GNU was essentially a new government and had no obligation to continue any policy initiatives started by the previous administration.
- ANC Secretary General Fikile Mbalula pushed back against Steenhuisen's accusations and said that the DA did not understand what it agreed to or was acting in bad faith. Mbalula said that there was no agreement that the bills passed by the previous administration would be halted, adding that the ANC would have not agreed to form a coalition government should that be a requirement from day one.
- Steenhuisen was supposed to meet with President Cyril Ramaphosa to iron out differences last night, before the two-day cabinet legkotla which will get underway in Pretoria this afternoon. The legkotla will be an opportunity for the cabinet to discuss policy priorities for the year ahead. The outcomes of the discussion will inform the President's State of the Nation Address (SONA) next week and the Finance Minister's National Budget Speech next month.
- Statistics SA revamped the composition and weightings of its CPI basked. The weight of housing, the largest category, decreased to 24.1% from 24.5%, while the weight of food and non-alcoholic beverages increased to 18.2% from 17.1%.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
CROSS ASSET: Markets Pick Up Where They Left Off
Markets have generally picked up where they left off on Friday - although the US 10y yield has drifted off the closing high to trade back to 4.60%, a move that's likely keeping the USD pinned so far Monday, helping the likes of AUD/USD and NZD/USD to hold above the recent pullback lows.
- Equity futures remain lower across the board, with US index futures pointing to another lower open today to build on the softer Friday close. Meanwhile Bund futures are off the lowest levels, but remain perilously close to 132.71, the December low posted at the re-opening of trade after the weekend.
- Significant newsflow has been few and far between, with US domestic politics focusing on the internal Republican debate over H-1B visas and the passing of President Carter.
- Focus for the duration of Monday trade will be on the MNI Chicago PMI at 1445GMT, expected to tick up to 43.0 from 40.2 previously.
- We anticipate volumes and broader liquidity to remain very light over the coming two sessions, particularly with tomorrow's European market closures and early closes elsewhere. EUR futures are posting cumulative volumes ~30% below an already subdued average for this time of day.
BTP TECHS: (H5) Bears Remain In The Driver’s Seat
- RES 4: 123.34 High Dec 11 and key resistance
- RES 3: 122.85 High Dec 12
- RES 2: 121.94 High Dec 13
- RES 1: 120.70/121.14 High Dec 20 / 20-day EMA
- PRICE: 119.85 @ Close Dec 27
- SUP 1: 119.41 Low Dec 27
- SUP 2: 119.11 Low Nov 18
- SUP 3: 118.80 76.4% retracement of the Nov 7 - Dec 11 bull cycle
- SUP 4: 118.51 Low Nov 8
A corrective cycle in BTP futures has resulted in a pullback from its recent highs and Friday’s sell-off highlights and extension of the current bear cycle. The contract has recently breached the 20-day EMA and sights are on 118.80, a Fibonacci retracement point. Key resistance and the bull trigger has been defined at 123.34, the Dec 11 high. Initial firm resistance is seen at 121.14, the 20-day EMA.
GILT TECHS: (H5) Impulsive Bear Cycle Extends
- RES 4: 94.50 High Dec 16
- RES 3: 93.64 High Dec 17
- RES 2: 93.38/59 High Dec 18 / 20-day EMA
- RES 1: 93.09 High Dec 21
- PRICE: 91.84 @ Close Dec 27
- SUP 1: 91.64 Low Dec 19
- SUP 2: 91.58 4.382 proj of the Dec 3 - 4 - 5 minor price swing
- SUP 3: 91.45 4.500 proj of the Dec 3 - 4 - 5 minor price swing
- SUP 4: 91.33 4.618 proj of the Dec 3 - 4 - 5 minor price swing
A strong bearish theme in Gilt futures remains in play and Friday’s move low reinforces this condition. The breach of 91.87, the Dec 19 low, confirms a resumption of the downtrend. Sights are on 91.58 next, a 4.382 projection of the Dec 3 - 4 - 5 minor price swing. Initial firm resistance is at 93.09, the Dec 20 high. Short-term gains would be considered corrective. Resistance at the 20-day EMA, is at 93.59.
