Afternoon Note
13 September 2023
Support & Resistance Levels
Data This Week
Market Highlights
Market Close
South Africa
Global Markets
Overnight Headlines
ZAR trading in a narrow range ahead of this afternoon’s CPI report.
Today’s Market & Resistance Levels
Data This Week
Monday
13H00 **SA MANUFACTURING PRODUCTION 2.3% (ACTUAL) VS 4.4% EXPECTED
17H00 US CONSUMER INFLATION EXPECTATIONS 3.4% F/CAST VS 3.5% PREVIOUS
Tuesday
08H00 UK unemployment 4.3% expected vs 4.2% previous
Wednesday
08H00 UK GDP MOM -0.2% VS 0.5% expected.
14h30 US INFLATION 3.6% expected vs 3.2% previous
14h30 US CORE INFLATION
Thursday
11h30 SA MINING PRODUCTION 0.5% VS 1.1% YOY PREVIOUS
14H30 US PPI 2.2% EXPECTED VS 2.4% YOY PREVIOUS
14H30 US RETAIL SALES 0.2% MOM VS 0.7% PREVIOUS
14H30 US JOBLESS CLAIMS 226K VS 216K PREVIOUS
Friday
16H00 US CONSUMER CONFIDENCE MICHIGAN 69.2 VS 69.5 PREVIOUS
Market Highlights
The Rand remained in a narrow range of 18.8900 to 18.9600 in early Joburg trading.
Traders citing an unwillingness to assume large positional risk ahead of the data.
The US10YT moved above 4.30% and the Dollar index recovered against it major peers , The Pound , Euro and Yen.
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- The buck recovering to 104.76 in early European trading.
- In addition, stocks retreating with the SP500 breaking technical support as traders fear for a “hawkish” inflation report.
- Data due at 14h30 and US INFLATION 3.6% expected vs 3.2% previous.
- Rates however the focus for markets and we envisage “new” directional impetus after the data.
- A higher print will be Dollar supportive and lower CPI could send the Dollar lower Vs the ZAR.
Technically we are range bound until the data and we advise caution ahead of the data release.
Trade: Stay Neutral
Market Close
DOW
-17 to 34,645
SP500
-25 to 4,461
NASDAQ
-144 to 15,282
Overnight Trading
Image: Trading Economics
South Africa
FISCAL RESTRAINT
Ramaphosa to push ahead with cutting government’s size to stabilise economy.
President Cyril Ramaphosa is forging ahead with spending cuts to revitalise an ailing economy, the Presidency has said.
The public sector wage bill is one of the factors expected to be trimmed by the government.
The Presidency said the “reforms” would be a priority over the next nine months, but the process would take time to complete.
South Africa’s R4.7 trillion “unsustainable public debt levels” forced Ramaphosa to consider cutting the government’s size to stabilise the economy.
This while a public sector union claimed 80 000 jobs would be cut from the government, calling the move “insane”.
Source: News24
UNION THREATEN STRIKES
A key Cosatu concern is what will happen to a public sector wage agreement struck in March that granted workers an average 7% increase for the next financial year.
SA’S largest labour union federation is threatening to go on strike if the government backs proposed austerity measures, which could include reneging on a public sector wage agreement.
National Treasury will present President Ramaphosa with a cost-saving plan in coming weeks to help tackle the country’s revenue shortfall and budget deficit.
Options include increasing taxes and slashing the number of government departments and state-owned enterprises.
The alternative is issuing more debt — a prospect that’s hit South African bonds in recent days.
Source: EWN
Global Markets
Stocks
US stock futures steadied on Wednesday as investors look ahead to a key US inflation reading that could influence the trajectory of Federal Reserve monetary policy.
In regular trading on Tuesday, the Dow shed 0.05%, the S&P 500 lost 0.57% and the Nasdaq tumbled 1.04%, with eight out of the 11 S&P sectors ending lower.
Those losses came as concerns about upside risks to inflation due to higher oil prices weighed on sentiment, and as investors positioned cautiously ahead of the August CPI report.
Analysts expect a 3.6% year-on-year rise in inflation, marking an increase from the previous month’s reading of 3.2%.
In corporate news, Apple announced at its annual event that iPhone 15 with USB-C charging starts at $799 and unveiled the brand-new Apple Watch.
Source: Trading Economics
Bonds
The yield on the 10-year US note rose to the 4.3% mark, approaching the 15-year high of 4.34% touched on August 22nd.
The US economy’s resilience to higher rates aligned with bets that the Fed will leave borrowing costs at a restrictive territory for an extended period.
Financial markets show a broad consensus that the Fed will hold rates unchanged this month, but concerns of stubborn inflation pinned 45% of the market to bet on a final 25bps hike in November.
In the meantime, higher bond issuance and ample concern about unsustainable budget deficits in the US pressured bond prices in the secondary market.
Source: CNBC
Overnight Headlines
Asian Markets
Asian continue lower on Fed fears.
In Japan, the Nikkei 225 Index fell 0.21% to close at 32,706, paring gains from the previous session and taking cues from a negative lead on Wall Street.
Investors braced for a key US inflation reading that could influence the trajectory of Federal Reserve monetary policy.
Fresh concerns about inflation amid higher oil prices also weighed on market sentiment.
Investors also digested private data showing corporate confidence among manufacturers and non-manufacturers in Japan declined in September.
Source: Reuters
Energy
Oil rally continues,
US WTI crude futures held around $89/bl.
Prices approaching ten-month highs amid expectations that output cuts by major producers will tighten the market in the coming months.
OPEC said global oil demand is expected to increase by 2.25 million barrels per day in 2024 and predicted a shortfall of 3.3 million bpd in the fourth quarter of this year.
The US EIA also said it expects a more modest 230,00-barrel deficit in the next quarter.
The International Energy Agency will publish its monthly report later on Wednesday.
Meanwhile, an industry report showed that US crude inventories rose by 1.17 million barrels last week, with increases also seen in gasoline and distillate stockpiles.
Source: Gulf News
Metals
Precious metals drifting ahead of US CPI.
Gold weakened below $1,910/oz on Wednesday.
Prices at its lowest levels in three weeks as investors awaited a US inflation at 14h30 today.
The annual inflation rate in the US due later on Wednesday is expected to accelerate to 3.6% in August from 3.2% in July due to energy cost pressures.
The US central bank is widely anticipated to hold interest rates steady at next week’s meeting, while bets for another rate increase in November are edging higher.
The European Central Bank also expects inflation in the Eurozone to remain above 3% next year, supporting the case for another rate increase on Thursday.
Elsewhere, data showed that producer prices in Japan rose the least in 29 months in August.
Source: KITCO
Currencies
Dollar range trading below 105.
The US dollar index steadied around 104.70, as investors avoided making big bets ahead of a key US inflation reading.
CPI is expected to accelerate to 3.6% in August from 3.2% in July due to energy cost pressures.
The US central bank is widely anticipated to hold interest rates steady at next week’s meeting, while bets for another rate increase in November are edging higher.
Meanwhile, the dollar tumbled half a percent on Monday after WSJ reported over the weekend that Fed officials are growing less certain about the need for more rate hikes.
The greenback also recently suffered a setback against the Japanese yen after Bank of Japan Governor Kazuo Ueda indicated a possible end to its negative interest rate policy.
Source: Forexlive