Afternoon Note
07 September 2023
Support & Resistance Levels
Data This Week
Market Highlights
Market Close
South Africa
Global Markets
Overnight Headlines
Support & Resistance Levels
ZAR trading in a narrow range of R19.1800-19.2500/$ 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 continued to hover around weaker levels with the “dollar bid”, remaining in the market
Trading in a narrow range R(19.1800-19.2500)/$ and any drops in the USDZAR rate below 19.2000, attracting Dollar buyers.
JHB interbank traders all sceptical of ZAR strength and preferring to fade the move in favour of acquiring “cheap” Dollars.
Earlier this morning stats SA reported a widening of the SA current account deficit.
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- The deficit widened to R160.7 bn in the Q2 of 2023 from a downwardly revised R63.7 bn in Q1.
- It was below market expectations of a R178.4 bn shortfall.
- This was the largest current account gap since Q3 2019, as the trade surplus fell significantly to R31.1 bn from R110.6 bn in Q1.
- Analysts citing a rise in merchandise imports and a decline in goods exports.
Globally , the Greenback remains on the front foot, especially VS the Japanese Yen.
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- BOJ authorities reiterated their commitment to loose monetary ( rates at 0%).
- The BOJ feels its required to support the Japanese economy.
- Thus with no push back ( on a carry basis) , the Dollar steamrolling the currency from the land of the rising sun.
- USDJPY on track to reach 150/$ and beyond.
- Recent data also attracting bond “vigilantes” i.e. bond hawks Stateside as ISM joined PMI for services, higher than expected.
This afternoon’s weekly jobless claims report of particular importance as another strong showing likely to send the Dollar higher.
Throw in rampant oil prices and the phrase “ yields higher for longer” suddenly appears to have more bite to it.
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- Risk assets remain on the defensive and we can see USDZAR higher over the coming sessions.
- At the time of writing markets were ; DXY 105 / XAU 1920 / US10YT 4.30 / EURUSD 1.0700.
Sustained price action above R19.30/$likely to attract initiative buying to drive prices to R19.50/$ and the all-time high of R19.90/$.
Long Dollars, add above R19.3000/$
Market Close
DOW
-198 to 34,443
SP500
-31 to 4,465
NASDAQ
-148 to 15,284
Overnight Trading
image: Trading economics
South Africa
RAYMOND ACKERMAN DIES
Retail legend Raymond Ackerman (92) has died, Pick n Pay, the retail group he founded, announced on Thursday morning.
“With profound sadness we announce that Pick n Pay founder Raymond Ackerman has passed away,” the group said in a short release.
Ackerman grew up in Cape Town, matriculated from the Bishops and earned a commerce degree from UCT.
He started his career with the retail chain Ackerman’s, which was founded by his father Gus.
Ackerman became CEO of Checkers in 1959, but seven years later was fired following clashes with the Greatermans board.
In 1967, he bought four Cape Town stores named Pick n Pay with the help of investors.
The chain quickly expanded, and by 1975, he opened South Africa’s first hypermarket – a supersized 22 000m² store – in Boksburg.
Source: Pick n Pay
SA STOCKS DUMPED BY FOREIGNERS
Outflows estimated to be R7bn.
Three shares, MultiChoice Group, Mr Price Group and TFG (The Forschini group) Limited, have seen sustained weakness during August.
Two of the three are down by more than 10% over the last 30 days.
This is due to certain foreign investors being forced to sell their holdings due to a quarterly MSCI review of the indices.
In total, there has been an approximate outflow of R7 billion ($360 million) from domestic equities following this rebalancing.
In the review, announced in the first half of August, the index provider said these three South African shares would be deleted from its SA Index and, therefore, from the MSCI Emerging Markets Index.
A follow up on the recent grey listing this appears to be more bad news for SA financial markets.
Source: Moneyweb
Global Markets
Stocks
Yesterday , the major averages ended lower during Tuesday’s regular session, as higher oil prices and global economic uncertainties weighed on sentiment.
In regular trading on Tuesday, the Dow fell 0.56%, the S&P 500 lost 0.42% and the Nasdaq shed 0.08%.
Meanwhile, energy and technology firms outperformed the market.
Those moves came as oil prices jumped after Saudi Arabia and Russia extended their voluntary supply cuts, sending the energy sector higher but stoking fears of stronger inflation.
Rising treasury yields also pressured equities.
Source: Trading economics
Bonds
The yield on the US 10-year moved towards 4.3% in the first week of September.
Traders betting the Fed will keep interest rates high for a long period as the US economy continues to show signs of resilience.
The ISM Services PMI unexpectedly jumped to a 6-month high in August, led by higher production, new orders and employment.
The survey also revealed an increase in price pressures, which coupled with high oil prices raised further concerns about a rise in inflation.
The Fed is expected to keep the fed funds rate steady this month while the odds for a quarter-point hike later in the year have been rising this week.
They currently stand at 42% for November (vs 40% early in the week) and 43% for December (vs 37%).
Source: CNBC
Overnight Headlines
Asian Markets
Asian equities mixed after weaker Chinese PMI’S.
In Japan, the Nikkei 225 fell 0.75% to close at 32,991.
The Japanese shares snapping an eight-day winning streak and tracking losses on Wall Street.
The stronger-than-expected US services sector data stoked inflation and rate hike worries.
Investors also digested data showing Japan’s leading and coincident indexes declined to multi-month lows in July.
On the policy front, BOJ board member Junko Nakagawa said the central bank must keep its ultra-loose monetary policy for now.
He added the prospect for achieving the 2% inflation target remains uncertain.
Source: Reuters
Energy
Oil prices holding onto strong gains.
Brent, the international oil benchmark remains close to the highest levels since November last year.
OPEC+ leaders Saudi Arabia and Russia extended supply cuts to the end of the year.
API data also showed that US crude stockpiles fell by about 5.5 million barrels last week, marking the fourth straight weekly decline and exceeding forecasts for a 1.429 million barrel draw.
Adding to demand side pressure in an environment where supply continues to make headlines.
Source: Gulf News
Metals
Precious metals drifting lower.
Gold declined to $1920/oz , holding a recent decline and facing pressure from a rallying dollar as stronger-than-expected US services sector data raised inflationary and rate hike concerns.
The ISM Services PMI in the US unexpectedly jumped to 54.5 in August, pointing to the strongest growth in the services sector in six months and posting well above forecasts of 52.5.
Markets are now seeing a hawkish pause from the Federal Reserve this month, where it could signal a potential rate increase in the next meeting.
ECB officials also warned that further rate rises are still on the table, while BOE Governor Andrew Bailey said on Wednesday that the central bank is “much nearer” to the end of its tightening cycle, though inflationary pressures persist.
Source: KITCO
Currencies
Dollar higher on the back of risk off sentiment.
The dollar index crashed through the 105 on Thursday, hovering at its highest in six months on expectations that interest rates will remain higher for longer as the US economy is doing much better than other major economies.
The ISM Services PMI in the US unexpectedly rose to a six-month high in August while PMIs for China and Europe disappointed.
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 47%.
The dollar appreciated to multi-month highs against most major currencies.
Source : Forexlive