Afternoon Note
03 October 2023
Support & Resistance Levels
Data This Week
Market Highlights
Market Close
South Africa
Global Markets
Overnight Headlines
ZAR weaker in afternoon trading.
Today’s Market & Resistance Levels
Data This Week
Monday
Tuesday
14h00 ATLANTA FED Raphael Bostic speaks
16h00 US JOLTS JOB OPENINGS 8.8M EXPECTED
Wednesday
09H15 SA GLOBAL PMI 50.3 EXPECTED
10H00 ECB’S LAGARDE SPEAKS
11H00 EU RETAIL SALES -0.3% MOM
11H00 EU PPI 0.6% MOM EXPECTED
14H15 US ADP EMPLOYMENT DATA +153K EXPECTED
16H00 US ISM SERVICES PMI 53.6 EXPECTED
Thursday
14H30 US WEEKLY JOBLESS CLAIMS +210K EXPECTED
Friday
14H30 US NON FARM PAYROLLS +163K EXPECTED
14H30 US UNEMPPLOYMENT 3.7% EXPECTED
Market Highlights
ZAR remained under pressure at mid-day with the local unit trading above the R19.30/$ level
The US Dollar index extended gains above 107 on Tuesday, hitting its highest levels since November last year.
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- Hawkish comments from Fed officials continue to strengthen the expectation that interest rates will remain elevated for an extended period.
- Traders will now refocus on the Fed’s next steps and await fresh data including Friday’s NFP report.
All of this suggesting a period of Dollar strength with Gold as well as other risk assets under pressure due to rising yields.
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- Major currencies like the Euro and Pound are all declining sharply on a monetary policy divergence.
- The Euro below €1.0500/$ and the pound approaching £1.2000/$.
- The Fed signalling chances of another hike (hawkish), while the both the BOE and ECB have indicated an end to the hiking cycle (dovish).
Trade:
BUY USDZAR on dips go long through 19.3000 for 19.6000
Market Close
DOW
-74 to 33,433
SP500
0 at 4,288
NASDAQ
+88 to 14,820
Overnight Trading
Image: Trading Economics
South Africa
LARGE SA FUEL HIKE
The price of petrol is going up again.
From Wednesday, consumers will pay between R1.08 and R1.14 more for petrol at the pumps.
The Department of Mineral Resources and Energy said that diesel would increase by between R1.93 and R1.96 a litre.
Wholesale paraffin will increase by R1.51 a litre and retail, R2.02.
The maximum price of LP gas will increase by R2.50 per kilogram.
Department spokesperson, Robert Maake:
“The reasons for these increases are as follows: the higher oil prices during the period are under review, which led to higher prices or petroleum products; there is a shortage of diesel in the market globally. Analysts saying the rand’s weakness against the US dollar and contributed around 22 to 26 cents per litre.”
Source: EWN
SA CHICKEN AND EGG CRISES
Chicken and egg prices set to soar ahead of festive season.
Latest strain of bird flu virus is more devious, and has hit the inland region where chicken densities are greater.
Industry insiders and economists have confirmed that SA shoppers will have to stomach higher poultry meat and egg prices as the sector battles its worst highly pathogenic avian influenza (HPAI) outbreak yet.
The severity of the anticipated price shocks is as yet unclear, but shortages could last well into the festive season as the industry tries to gain control over the situation.
“We are already seeing shortages in commercial table eggs in the marketplace and that will put upwards pressure on the price of table eggs,” says Breitenbach.
“There will also be a shortage of chicken meat going into the festive season and that will also put upwards pressure on the prices of chicken meat.”
Source: Moneyweb
Global Markets
Stocks
Stock futures in the US were flat to lower on Tuesday, with traders weighing hawkish comments from Fed officials and awaiting further economic data to gauge the economic performance.
The JOLTS report is due later in the morning. At the same time, Treasury yields continued to increase and the dollar strengthened further.
On the corporate front, megacap growth stocks were under pressure, with Apple falling around 0.2% in premarket trading.
Also, Airbnb fell 2.3% after news mentioning Keybanc had downgraded the stock to “sector weight”.
Source: Trading Economics
Bonds
The yield on the US 10-year Treasury note climbed to 4.61% to kick off the October month, holding close to sixteen-year highs, as traders refocus on the Fed’s next steps and await fresh data.
Meanwhile, US lawmakers managed to avert a government shutdown.
A bill ensuring funding until November 17th received support and was promptly signed into law by President Biden just minutes before the deadline, providing some relief to investors.
At the same time, the outlook for sustained high interest rates persists. with traders awaiting a batch of appearances from several Fed officials.
On the data front, the payrolls report due Friday will also be keenly watched.
Source: Bloomberg
Overnight Headlines
Asian Markets
Stocks lower in Asian trading.
In Japan , the Nikkei 225 fell 1.64% to close at 31,238, hitting the lowest levels in at least a month and tracking weakness in global markets.
Traders citing a strong dollar and surging Treasury yields dented sentiment.
Investors also monitored the Japanese yen closely as it weakened to levels that raised fears of another government intervention.
Resource-related stocks led the decline on weaker commodity prices.
Source: Reuters
Energy
Oil prices rebounding.
WTI crude futures fell toward $88 per barrel on Tuesday, sliding for the fourth straight session as investors lightened holdings of risk assets amid a strong dollar and surging Treasury yields.
The dollar at fresh ten-month highs against a basket of FX and the 10-year US yield rallied to its highest levels since 2007.
The Buck supported as strong US economic data bolstered the view that the Federal Reserve will keep interest rates higher for longer.
The ISM Manufacturing PMI for the US showed the contraction in the manufacturing sector slowed sharply and price pressures eased in September.
Analysts also noted that a key oil pipeline between Iraq and Turkey looked ready for operations this week which could result in additional oil flows and ease global supply tightness.
Meanwhile, markets look ahead to an OPEC+ meeting this week, where it is expected to maintain previously announced output cuts.
Source: GULF news
Metals
Precious metals continuing to slide.
Gold fell below $1,830 / troy oz , sinking to its weakest levels in seven months due to constant pressure from a strong dollar and surging Treasury yields.
The dollar rally due to the 10-year US yield rallied to its highest levels since 2007 as strong US economic data bolstered the view that the FED will keep interest rates higher for longer.
The ISM Manufacturing PMI for the US released Monday indicated the smallest contraction in factory activity in nearly a year for September.
Additionally, news that US lawmakers arrived at a temporary agreement over the weekend that would keep the government funded for 45 more days pressured the metal further.
Investors now look ahead to comments from various Fed officials this week for additional insights into the central bank’s policy plans, as well as the key US monthly jobs report on Friday.
Source: KITCO
Currencies
Dollar scaling new high’s.
The dollar index extended gains to above 107, its strongest level since November and tracking Treasury yields higher.
Dollar supported as hawkish comments from Fed officials continue to strengthen the expectation that interest rates will remain elevated for an extended period.
On Monday, Fed Governor Bowman stated her willingness to support raising the federal funds rate at a future meeting.
Fed Bank of Cleveland President Mester noted that the central bank may need to raise rates once more this year.
Additionally, Fed Vice Chair for Supervision Barr emphasized that the most pressing question at this time is how long interest rates will need to stay elevated.
Several labour market indicators, including the upcoming payrolls report and further comments from Fed officials, will be closely watched in the coming days
Source: Forexlive