Afternoon Note
14 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 losing ground in early Thursday trading reaching R18.92/$ after a strong performance on Thursday.
The Dollar recovering in early morning trading, as investors digested the impact of the recent US CPI report.
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- The annual headline inflation rate in the US rose for a second consecutive month to 3.7% in August, exceeding market expectations of 3.6%.
- Traders now see a 97% chance that the Fed would hold rates steady at next week’s meeting, while bets for a rate hike in November have eased.
- The US10YT remaining elevated at 4.26%.
Earlier this morning SA mining production declined sharply, at -3.6% YOY vs a +0.5% gain expected, and also MoM fell from a previous gain +1.2% to -1.7% MoM.
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- It was the steepest contraction in mining activity since February, as output fell significantly for diamonds (-33.4%), nickel (-16.3%), PGMs (-10.4%) and coal (-7%).
- Conversely, main increases were seen for gold (+12.9%), iron ore (+13.8%), copper (+12.8%) and other metallic minerals (+7.1%).
- This afternoon markets also await the European Central Bank’s interest rate decision.
- The European Central Bank is set to decide today whether to increase its interest rates to multi-year highs.
- Traders carefully waiting in what could be the final step in its battle against inflation or to pause, given the worsening economic conditions.
Technically we are range bound until the data and we advise caution ahead of the data release.
Trade: Buy USDZAR on dips, add through R19/$
Market Close
DOW
-70 to 34,575
SP500
+5 to 4,467
NASDAQ
-0 to 15,282
Overnight Trading
Image: Trading Economics
South Africa
STAGE 7
Erratic coal power stations may push SA over the edge.
Ramaphosa to push ahead with cutting government’s size to stabilise economy.
Eskom has warned that South Africa could face Stage 7 or 8 load shedding on Wednesday evening if electricity usage is not reduced.
Indefinite Stage 6 load shedding has already been implemented earlier this week.
A cold front hit the country on Tuesday, increasing the demand for electricity during the peak hours of between 17:00 to 21:00.
On Tuesday evening, at the start of the cold front, peak demand hit 33 423MW – much higher than the forecast demand.
The fear is that demand could reach similar levels on Wednesday, as the cold front has spread even further.
Source: News24
SARB ON HOLD NEXT WEEK
SARB will keep interest rates steady at 8.25% at its September 21 meeting to curb the impact of fuel price inflation.
According to nearly all economists polled by Reuters, but will start cutting borrowing costs early next year.
In an almost unanimous poll taken September 7-13, 29 of 30 economists said the South African Reserve Bank will keep rates steady.
One opted for a 50 basis point hike to 8.75%.
Source: EWN
Global Markets
Stocks
US stock futures edged higher on Thursday as investors look ahead to the August producer price index report to guide the economic and interest rate outlooks further.
In regular trading on Wednesday, the Dow fell 0.2%, while the S&P 500 and Nasdaq Composite rose 0.12% and 0.29%, respectively.
Those moves came as investors assessed the August consumer price index report that came in hotter-than-expected.
Traders now see a 97% chance that the Fed would hold rates steady at next week’s meeting, while bets for a rate hike in November have eased.
Mega-cap technology names outperformed the market on Thursday, with gains from Tesla (1.4%), Nvidia (1.4%) and Amazon (2.6%).
Meanwhile, real estate, energy and industrial stocks were the worst performers.
Bonds
The yield on the 10-year US Treasury note rose to the 4.3% mark, approaching the 15-year high of 4.34% touched on August 22nd.
The renewed evidence of stubborn inflation strengthened bets that the Federal Reserve will keep borrowing costs restrictive for a prolonged period.
Inflation in the United States rose for a second month to 3.7% in August, above market estimates of 3.6%.
The data aligned with other results that strengthened the hawkish scenario for the US central bank, including multi-month lows in initial and continuous unemployment claims and resilience in the services PMI.
Consequently, financial markets show a broad consensus that the Fed will hold rates unchanged this month.
BUT concerns of stubborn inflation pinned nearly half of the market to bet on a final 25bps hike in November.
Overnight Headlines
Asian Markets
Asia continue lower on Fed fears.
The Nikkei 225 Index jumped 1.41% to close at 33,168, erasing losses from the previous session as US consumer inflation data came in hotter-than-anticipated.
Investors also digested data showing machinery orders in Japan fell more than expected in July, while industrial output dropped less than anticipated.
Technology stocks led the charge, with gains from Tokyo Electron (3%), Advantest (2%), Disco Corp (5.7%), Keyence (1.2%) and Lasertec (5.8%).
Other index heavyweights also advanced, including Mitsubishi Heavy Industries (1.6%), Fast Retailing (3%) and Toyota Motor (1.5%).
Source: Reuters
Energy
Oil remain well bid.
Brent crude futures rose above $92/bl on Thursday, hovering near the strongest levels in ten months amid expectations that the global oil market will tighten further in the coming months.
The IEA said on Wednesday that extended supply cuts by Saudi Arabia and Russia will mean a substantial market deficit through the fourth quarter, while maintaining its demand growth estimates for 2023 and 2024.
The report came a day after OPEC said it projects a large deficit of 3.3 million barrels per day in the fourth quarter, while the US EIA forecasts a smaller deficit of 230,000 barrels in the same period.
Meanwhile, official data showed that US crude inventories rose by 4 million barrels last week, defying expectations for a 1.9 million barrel drop.
Source: Gulf News
Metals
Precious metals lower after US CPI report.
Gold steadied around $1,910 an ounce on Thursday as investors digested the latest US consumer inflation report, which had no significant impact on the outlook for Federal Reserve monetary policy.
The annual headline inflation rate in the US rose for a second consecutive month to 3.7% in August, exceeding market expectations of 3.6%.
Meanwhile, the annual core inflation print, which has a heavier weight for central bank policy decisions, slowed to 4.3% in August from 4.7% in July, in line with forecasts.
Investors now look ahead to the US producer inflation report on Thursday for further clues.
Markets also await the European Central Bank’s interest rate decision later today.
Source: KITCO
Currencies
Dollar range trading below 105.
The dollar index remained stable at 104.7 on Thursday as investors awaited fresh US data.
The recent US consumer inflation report that failed to impact the expectations for the Federal Reserve’s monetary policy direction.
The annual inflation rate in the US rose for a second consecutive month to 3.7% in August, exceeding market expectations of 3.6%.
Meanwhile, the annual core inflation print, which has a heavier weight for central bank policy decisions, slowed to 4.3% in August from 4.7% in July, in line with forecasts.
Traders now see a 97% chance that the Fed would hold rates steady at next week’s meeting, while bets for a rate hike in November have eased.
Investors now look ahead to the US producer inflation and retail sales report and the European Central Bank’s interest rate decision later today.
Source: Forexlive