Afternoon Note
08 September 2023
Support & Resistance Levels
Data This Week
Market Highlights
Market Close
South Africa
Global Markets
Overnight Headlines
ZAR stronger in early Friday trading on the back of dovish Fed comments.
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 traded stronger in early JHB trading.
Traders citing profit-taking after the Dollar retreated off recent highs.
The US currency trading lower after dovish rate comments from most notably Raphael Bostic, the President of the Atlanta Fed.
Bostic a noted Dove, argued that rates “..are already at a restrictive level, to ensure inflation declines further to the Fed’s 2% goal…”.
Dollar yields declined with the benchmark 10Year dropping to 4.22% off recent 4.3% highs.
Stocks also higher the SP500 rebounding off recent lows and this helping the ZAR rally due to improved sentiment.
Markets however wary of next week’s US inflation data , with a slightly higher print of CPI 3.4% YOY expected vs 3.2% previous.
Markets also noting growing wage pressures after strong PMI / ISM data.
Earlier on Thursday, General Motors (GM), made a counterproposal to the UAW, in a bid to avoid a costly strike.
-
- But United Auto Workers President Shawn Fain called the offer “insulting”.
- The offer was for a 10% wage hike, and two additional 3% annual lump sum payments.
- If passed, the pay rises are multiples above inflation and would likely be a concern to the Fed.
Also a worry are the continuation of the recent oil price rally, with OPEC+ determined to get prices higher.
The fears of secondary inflation effects looming large on a market hoping for a Fed pause.
Brent Crude back above $90/bl at the time of writing.
All of the recent data points to a “hawkish” pause from the FED at the month end FOMC meeting.
Especially after PCE remained high as well as recent services data and a tight labour market.
Thus we expect the Dollar to remain “BID” in this environment and the ZAR to remain under pressure.
Trade : BUY Dollars on bids (reverse through R19/$), add above R19.3000/$
Market Close
DOW
+57 to 34,500
SP500
-14 to 4,465
NASDAQ
-123 to 15,216
Overnight Trading
image: Trading economics
South Africa
SA PORTS
Officials said the multi-billion-rand redevelopment of the country’s six busiest ports will benefit the local communities around those areas.
On Wednesday, the Department of Home Affairs announced it would be going on a massive public-private partnership programme.
The plans to upgrade the Beitbridge, Lebombo, Maseru Bridge, Ficksburg, Kopfontein and Oshoek border ports.
The redevelopment of South Africa’s six busiest land ports has been allocated US$1 million (R19.25 million) by SADC.
The money will be going towards the preparation phase of the public-private partnership project which includes consulting, feasibility studies, traffic, land and bulk infrastructure modelling.
Source: EWN
THE CURRENCY MARKET AND THE ZAR
The dollar was headed for its longest weekly winning streak in nine years on Friday, bolstered by a resilient run of US economic data that has also put the end of the Federal Reserve’s aggressive rate-increase cycle into question.
The US dollar index, which measures the greenback against major peers, was last 0.15% lower at 104.89 but remained not far from the previous session’s six-month high of 105.15.
The index was on track to extend its gains into an eighth straight week, and is up 0.6% thus far.
The ZAR like all major currencies on the back foot vs the ZAR.
Source: Moneyweb
Global Markets
Stocks
US stock futures steadied on Friday after the major averages ended mixed during Thursday’s regular session, as renewed fears of further interest rate hikes from the Federal Reserve weighed on investor sentiment.
In regular trading on Thursday, the Dow rose 0.17%, while the S&P 500 and Nasdaq Composite fell 0.32% and 0.89%, respectively.
Those moves came as data showed that initial jobless claims in the US came in at 216,000 last week, lower than the 230,000 expected by analysts.
Markets still expect the Fed to hold rates steady this month, while bets for a rate increase in November edged higher.
Source: Trading economics
Bonds
The yield on the US 10-year approached 4.3% in the first week of September as traders bet the Fed will keep interest rates high for a long period.
The US economy continues to show signs of resilience.
Initial jobless claims unexpectedly fell last week to the lowest level since February while the ISM Services PMI posted a surprise jump to a 6-month high in August.
The survey also revealed an increase in price pressures, which coupled with high oil prices raised further concerns about a rise in inflation.
Meanwhile Governors Bostic, Collins and Wallace all called for a “patient” Fed.
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 43% for November (vs 40% early in the week) and 43% for December (vs 37%).
Overnight Headlines
Asian Markets
Asian equities lower on Fed fears.
In Japan, the Nikkei 225 Index dropped 1.16% to close at 32,607.
The index sliding for the second straight session as investors reacted to a report showing Japan’s second quarter GDP growth was revised lower.
Japanese shares also erased most of the gains made earlier in the week amid growing fears that the Federal Reserve could raise interest rates further.
This on the back of solid US economic data.
Nearly all sectors declined on Friday, with notable losses from index heavyweights such as Tokyo Electron (-3.8%) and Sony Group (-2%).
Source: Reuters
Energy
Oil prices on the rise.
US WTI crude once again above $87/bl on Friday.
Markets still moving higher on the extended supply cuts from OPEC+ leaders tightened the outlook.
Saudi Arabia recently announced that it would extend its voluntary output cut of 1 million barrels per day through the end of December.
Russia also extended its voluntary reduction in oil exports by 300,000 bpd until the end of the year.
Moreover, official data showed that US crude inventories declined by 6.3 million barrels last week, way higher than market expectations for a 2.1 million barrel draw.
Slowing the rally are renewed FED dears as well as a slowdown in the Chinese economy (the world’s largest importer).
Source: Gulf News
Metals
Precious metals under pressure.
Gold declined below $1,920/oz and will end the week lower as the latest batch of data pointed to a robust US economy.
The data allowing the FED some space to keep monetary settings restrictive or even raise interest rates further.
New unemployment claims in the US fell to their lowest in over six months in the final week of August, the ISM Services PMI in the US also unexpectedly jumped to 54.5 in August.
The data 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 FED this month, BUT it could signal a potential rate increase in the next meeting.
Source: KITCO
Currencies
Dollar recovering after early morning losses.
The dollar index eased below 105 on Friday, before recovering ensuring it is headed for its 8th consecutive weekly advance.
Traders citing strong economic data added leeway for the Federal Reserve to remain hawkish for a prolonged period.
Employment data as well as ISM and PMI data all supportive of a healthy US economy and room for a “hawkish” Fed to get inflation to 2%.
Source : Forexlive