Afternoon Note
15 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 trading around the R19/$ handle and on track to close near the week’s open.
After early gains for the local unit, rising inflation via US CPI and PPI as well as Retail sales and claims data all supporting a Dollar rebound, at the expense of the ZAR.
ZAR bulls on the defensive and a break through R19.0500/$ targets 19.1500 before 19.3000.
Markets taking a breather ahead of next week’s US FOMC and SARB MPC meetings.
Both central banks expected to hold rates unchanged.
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- However, the propensity to adhere to a hawkish stance, very much in favour of the USA and likely to be Dollar supportive.
- Fed chair Powell suggested the Fed could hold rates steady at its next meeting in September.
- Powell also reaffirmed the commitment of the central bank to steer inflation towards the targeted 2%.
- At the July meeting, the SARB left its key repo rate unchanged at a 14-year high of 8.25% and marking a pause in its tightening cycle after 10 consecutive rate hikes.
- However, the Governor noted the decision does not represent the end of the hiking cycle neither that interest rates have peaked and the next steps will depend on inflation.
- SA CPI due on Wednesday with a slightly higher consensus at 4.9% yoy expected vs 4.7% previous.
The Dollar remaining above 105 and the benchmark US10YT at 4.33% as we head into the final session (New York) of the week.
Source: Resbank
Trade: Buy USDZAR on dips, add through R19/$
Market Close
DOW
333 to 34,907
SP500
+37 to 4,505
NASDAQ
+112 to 15,675
Overnight Trading
Image: Trading Economics
South Africa
TREASURY FISCAL RESTRAINT
‘SA IS NOT GOING TO COLLAPSE’: NTSHAVHENI ON LOOMING GOVT SPENDING CUTS.
The national government said while the country was in a financial mess, it had not reached a crisis stage yet.
On 31 August, Treasury sent a cost containment letter to several government entities raising red flags over the country’s depreciating public finances.
The letter stated that the government would have to make unprecedented cuts to spending in order to ensure fiscal stability.
Speaking during a post-Cabinet media briefing on Thursday, Minister in the Presidency Khumbudzo Ntshavheni said this was a global issue and was not isolated to South Africa.
Source: EWN
MORE JOBS AT RISK
Sibanye Gold Mine restructuring puts almost 3 000 jobs at risk.
A possible restructuring at the so-called Kloof 4 shaft could affect 2 389 employees and 581 contractors, Sibanye said.
Sibanye Stillwater said it will enter talks with labour unions over a possible restructuring at one of its South African gold mines that could impact almost 3 000 people.
The announcement is the latest blow for the company’s Kloof 4 shaft, where operations were suspended on August 1 following an incident that damaged infrastructure.
That “compounded” the challenges faced at the mine about 60 kilometers (37 miles) from Johannesburg, the company in a statement Thursday.
Source: Moneyweb
Global Markets
Stocks
US stock futures held steady on Friday after the major averages posted gains on the back of the latest IPO debut.
In regular trading on Thursday, the Dow jumped 0.96%, the S&P 500 climbed 0.84% and the Nasdaq Composite added 0.81%, with all 11 S&P sectors ending higher led to the upside by real estate, utilities and materials.
Those gains came as a successful market debut of Arm Holdings on Thursday, which soared nearly 25%, signaled a potential end to a prolonged technology IPO drought and lifted “animal spirits” in the market.
Investors also assessed data showing the headline producer inflation rate exceeded estimates, although the core PPI came in line with expectations.
Investors now look ahead to more economic reports on Friday as well as central bank actions on Friday.
Bonds
The yield on the 10-year US Treasury note rose toward the 4.3% mark, heading near the 15-year high of 4.34% touched on August 22nd.
Data strengthened bets that the Federal Reserve will keep borrowing costs restrictive for a prolonged period.
Producer inflation in the United States sharply overshot expectations in August, magnifying the hotter-than-expected CPI report to erase last month’s perceptions of disinflation.
Additionally, strong retail sales underscored the resilience of the consumer, and unemployment claims held close to multi-month lows to consolidate tightness in the labour market.
Consequently, financial markets showed a broad consensus that the Federal Reserve will not call the end of its tightening cycle this month.
Overnight Headlines
Asian Markets
Asian stocks higher on Wall street rally.
In Japan, the Nikkei 225 Index jumped 1.1% to close at 33,533 extending gains from the previous session and taking cues from a strong lead on Wall Street.
Investors shrugged off a hotter-than-expected US producer inflation report and cheered Arm Holdings’ successful IPO.
Both benchmark indexes also gained nearly 3% for the week.
Source: Reuters
Energy
Oil remain well bid.
Brent crude futures rose above $94 per barrel on Friday, scaling fresh ten-month highs amid an improving global demand outlook and tightening supplies.
The international oil benchmark is also up about 4% this week and is on track to advance for the third consecutive week.
On Thursday, China’s central bank cut cash reserve requirements for all banks to boost the country’s economic recovery, lifting the demand outlook in the world’s top crude importer.
Growing expectations that major central banks are nearing the end of their tightening cycles also aided sentiment further.
Source: Gulf News
Metals
Precious metals lower after US CPI report.
Gold rose above $1,910 an ounce on Friday but was still set to end the week little changed, as investors continued to assess the economic and monetary policy outlook globally.
The metal came under pressure earlier in the week as the dollar gained on robust US economic data which bolstered bets that the Federal Reserve will keep its monetary policy restrictive for some time.
Traders are still betting that the Fed would hold rates steady next week, while the central bank’s next policy move in November remains up for debate.
Meanwhile, the European Central Bank implemented another 25 basis point rate hike on Thursday, in what analysts believe is its last hike in the current tightening cycle.
Source: KITCO
Currencies
Dollar back above 105.
The dollar index held above 105 on Friday, hovering at its highest levels in six months.
Robust US economic data raised hopes that the Federal Reserve could engineer a soft landing even if it keeps interest rates higher for longer.
US retail sales advanced 0.6% MoM in August, beating forecasts for a 0.2% gain while producer prices increased 0.7%, the most since June 2022 and exceeding market expectations for a 0.4% rise.
Traders are still betting that the Fed would hold rates steady next week, while the central bank’s next policy move in November remains up for debate.
The dollar also gained against the euro after the European Central Bank delivered what many analysts believe is the last hike in its current tightening cycle.
Meanwhile, the greenback weakened versus the yuan after China posted stronger-than-expected economic numbers for August.
Source: Forexlive