30 July: Inflation anchors, cigarettes still expensive

Overnight global mood

US markets are holding steady as earnings season rolls on and inflation data keeps traders guessing on rate cuts. Europe and Asia showed quiet conviction overnight, with tech and defensive stocks trading sideways. Nothing earth-shattering to spook the JSE open, though the rand will be watching Fed sentiment like a hawk watches an Eskom announcement.

Today's big stories

• Inflation anchor holds if SARB gets its way. The Reserve Bank's longer-term outlook remains constructive if it can nail inflation at 3%, and that's a meaningful word: "if". The central bank needs consistent wins here, because every month the data disappoints, credibility erodes a little more. Read more.
• Illicit cigarettes cost R10; legal ones cost R40 to R70. South Africa's tobacco tax works so well that illegal smokes are now 75% cheaper, which means either the government's tax policy is working brilliantly or the illegal trade is thriving. Spoiler: it's the second one. This is a revenue and regulatory issue that quietly erodes tax take and corporate earnings in the tobacco space. Read more.

Sector watch

Keep an eye on financials and consumer staples today. The inflation story matters to banks (rates), and the tobacco piece touches earnings quality for food and beverage names. Discretionary retail should stay quiet unless there's a rand shock, which, given the global mood, feels unlikely. Energy stocks will drift unless Eskom has a new load shedding announcement, which is about as predictable as a taxi at a red light.

One thing to watch

Tobacco stocks. Earnings quality matters less when half your addressable market is buying from the guy on the corner for a quarter of the price. If you own a tobacco play, this illicit trade data is a reminder that regulatory challenges don't solve themselves.