Afternoon Note
05 September 2023
Support & Resistance Levels
Data This Week
Market Highlights
Market Close
South Africa
Global Markets
Overnight Headlines
Support & Resistance Levels
ZAR weakness continued with the local unit reaching R19.2600/$ in early JHB trading.
Today’s Market Support and Resistance Levels:
Data This Week
Monday
**US HOLIDAY
Tuesday
09H15 S&P SA PMI’S 49 F/CAST VS 48.2 pREVIOUS
11H30 SA GDP GROWTH RATE 1.1% YOY EXPECTED VS 0.2% PREVIOUS
16H00 US FACTORY ORDERS -2.5% EXPECTED VS 2.3% PREVIOUS
17H30 US TREASURY BILL AUCTIONS 3M AND 6M
Wednesday
16H00 US ISM SERVICES PMI 52.5 EXPECTED VS 52.7 PREVIOUS
Thursday
11H00 SA CURRENT ACCOUNBT R-178BN VS R-66BN PREVIOUS
14H30 JOBLESS CLAIMS 235K EXPECTED VS 228K
Friday
10H00 SA CONSUMER CONFIDENCE -28 F/CAST VS -25 PREVIOUS
Market Highlights
The Rand’s recent bear run continued with the unit reaching R19.2600 in early Johannesburg trading
Traders citing broad-based Dollar gains after the Buck gained across the G7 landscape.
The Dollar stronger vs the Euro, Pound and Yen.
The Greenback at the highest level since mid-March, driven by a risk-off sentiment following disappointing PMIs for China and Europe.
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- Traders citing concerns about the global economy.
- US 10YT treasury yields also above 4.20% supporting demand for the Dollar.
- Earlier SA GDP surprised to the topside with STATS SA releasing a print of 1.6% vs 1.1% expected YOY and 0.2% previous.
- It was the strongest expansion since Q3 of 2022, partly attributed to the decrease in power outages.
- The country however back at stage 6 and affecting market sentiment.
Technically the Rand have crashed through some major support levels i.e. 18.9000/19.0800/ 19.1500.
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- We expect consolidation around these levels before a move weaker towards 19.2500 – 19.5000.
- The picture looks the same for the Yen and Euro indicating further US Dollar gains on the cards.
source: Statistics South Africa
Trade: Long Dollars, add buying on Dips
Market Close
US holiday *** markets closed on Monday.
Overnight Trading
image: Trading economics
South Africa
SA ECONOMY EXPANDS
South Africa’s economy grew faster than expected as agriculture and manufacturing industries helped lift activity.
STATS SA reported, GDP expanded 0.6% in the three months through June compared with growth of 0.4% in the prior quarter.
That’s more than the central bank’s forecast of 0.4% growth and the 0.3% median estimate of 15 economists in a Bloomberg survey.
Economic output increased 1.6% from a year earlier.
However with a return to Stage Loadshedding, the SARB warned electricity rationing will shave 2% points off economic growth this year.
A study by consultancy GAIN Group forecasts inefficiencies at Transnet will cost the economy R353 billion ($18.4 billion), equivalent to 4.9% of GDP.
Source: EWN.
FUEL PRICE HIKE
The Department of Mineral Resources and Energy said the increase in crude oil prices internationally was one of the reasons why the petrol price had been adjusted.
The Minister of Mineral Resources and Energy, Gwede Manthashe, has announced a new range of fuel price increases.
He said the increase was based on current local and international factors.
Department spokesperson, Robert Maake said , “…The following fuel prices will be effective on Wednesday, the sixth of September, both grades of petrol will increase by R1.71 cents per litre.
Diesel will increase by R2.76 cents and R2.84 cents per litre at wholesale level,” said the department’s Robert Maake.
Maake said the increase in crude oil prices internationally was one of the reasons why the petrol price had been adjusted.
Global Markets
Stocks
US stock futures were muted on Tuesday to start the holiday-shortened week, while investors look for fresh cues that could fuel the recent market rally further.
Last week, the Dow and Nasdaq Composite gained 1.4% and 3.3%, respectively, notching their best performances since July.
The S&P 500 also added 2.5% for its best week since June.
Those gains came as a slowing economy and easing inflationary pressures in the US raised hopes that the Fed won’t need to raise interest rates further.
The market now waiting for factory orders.
Source: Trading economics
Bonds
The yield on the US 10-year Treasury note continued to march higher to above 4.2% as traders return from a long weekend.
and await more economic data due this week including factory orders and the ISM Services PMI to assess the monetary policy outlook.
Most market participants expect the Fed to keep the fed funds rate steady this month but doubts persist on whether another 25bps increase will happen this year.
The odds for a quarter point hike in November currently stand at 36% and 33% for December.
Source: CNBC
Overnight Headlines
Asian Markets
Asian equities mixed after weaker Chinese PMI’S.
In Japan , the Nikkei 225 Index rose 0.3% to close at 33,037, reversing losses from earlier in the session and ending higher for the seventh straight day.
The weaker Yen boosted the profit outlook for export-heavy Japanese companies.
Investors also reacted to data showing Japan’s August private sector activity expanded at the fastest pace in three months.
Source: EWN
Energy
Oil prices higher again!
US WTI crude held above $85 per barrel on Tuesday, hovering at the highest levels in over nine months.
Prices supported by expectations that OPEC+ leaders would extend measures to keep oil supplies tight.
Russian Deputy Prime Minister Alexander Novak said on Thursday that Russia agreed with its OPEC partners on the parameters for continued export cuts.
Saudi Arabia is also expected to extend its voluntary 1 million barrels per day output cut into October.
Source: Gulf News
Metals
Precious metals on the backfoot vs a rampant Dollar.
Gold declined to $1,930/oz on Tuesday.
Prices still bid as signs of cooling in the US economy raised hopes that the Federal Reserve is done hiking interest rates this year.
The latest US jobs report showed the US unemployment rate unexpectedly rose to 3.8% in August, the highest since February 2022 and above market expectations of 3.5%.
Markets are betting that the Federal Reserve will hold interest rates steady this month, and see a greater chance that it will not hike rates further this year.
Source: KITCO
Currencies
Dollar higher after Fed comments.
The dollar index rose to 104.6 on Tuesday, the highest level since mid-March, driven by a risk-off sentiment.
RISK OFF – Traders citing disappointing PMIs for China and Europe, which reignited concerns about the global economy.
For now, the Fed is expected to maintain interest rates steady this month, and the likelihood of a 25bps increase in November currently stands at 36%.
The dollar strengthened against all major currencies, with the most pronounced buying activity against the Aussie (+1.2%) after the RBA kept interest rates unchanged.
The greenback also saw a 0.4% increase against the Euro and 0.7% against the British pound.
Source : Forexlive