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Good Afternoon
The ZAR trading in wide ranges (with a negative bias) after the release of the US FOMC minutes.
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Data this week
Thursday
- 14h30 : US initial jobless claims 240k EXPECTED Vs 248k
Friday
- 08H00 : UK RETAIL SALES MOM -% VS 0.7% EXPECTED
Market Highlights:
The Rand recovered from Tuesday low’s to reach R19/$ in early Wednesday trading.
- The ZAR recovered after early session losses to trade at R19.06/$ in SA afternoon trading.
- Currencies in general, remain at the mercy of the Dollar, after a hawkish FOMC minutes release prompted a sell-off in risk.
- Members citing inflation concerns remain and we are left open with the possibility of the FED hiking again.
- It appears directional price action only coming from the USA, with profit-taking in the LDN/JHB session.
- The concern remains for US interest rates and with elevated US yields we expected a stronger Dollar.
- The US10YT AT 4.30%, appears to want to target 4.5% before 5%
- Global yields on the rise after release of Fed minutes.
- Government bond yields around the world marched higher as investors anticipate that interest rates will remain elevated due to persistent high inflation.
- The yield on the US 10-year, rose to as high as 4.31%, the highest since October’s 15-year high.
- Members also stating further tightening of monetary policy will be needed.
- The latest Fed minutes showed officials continued to see significant upside risks to inflation.
- Earlier, Norway’s central also lifted rated by another 25 bps to 4% .
- Borrowing costs are now at their highest level since 2008,
- and the central bank warned they will most likely be raised further in September in an attempt to curtail inflation.
- Markets await US weekly jobless claims at 14h30 SA time.
- The ZAR will continue to underperform in this environment.
- Trade : BUY USDZAR on DIPS
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SOUTH AFRICA
BRICS BANKS
- BRICS nations to meet in SA will be seeking to blunt Western dominance.
- South Africa will host Chinese President Xi Jinping, Brazil’s Luiz Inacio Lula da Silva and Indian Prime Minister Narendra Modi for the Brics summit from August 22 to 24.
- Russian president Vladimir Putin will be represent by Russia’s foreign minster.
- Few details have emerged about what they plan to discuss, but expansion is expected to be high on the agenda.
- Some 40 nations have shown interest in joining, either formally or informally, according to South Africa.
- They include Saudi Arabia, Argentina and Egypt. Source Moneyweb
SASOL SHARES DECLINE
- Sasol shares dropped the most in five months.
- The fuels and chemicals producer said the poor performance of South Africa’s state-owned companies has affected its business and is expected to result in lower earnings.
- The government-run firms “have constrained our supply chains and resultant sales volumes”.
- Sasol announced in a trading statement ahead of 2023 annual results.
- Disruptions on state rail company Transnet’s network have caused delays and an influx of trucking that clogs roads. Source : SENS
GLOBAL MARKETS
Stocks
Stocks consolidating after US session route.
- US stock futures edged lower on Thursday as investors weighed the latest FOMC minutes which signalled that further interest rate hikes are still on the table.
- S&P 500 and Nasdaq 100 futures fell about 0.1%, while Dow futures were flat.
- In regular trading on Wednesday, the Dow fell 0.52%, the S&P 500 dropped 0.76% and the Nasdaq Composite tumbled 1.15%.
- Policymakers continued to stress that there are upside risks to inflation.
- It could warrant a prolonged period of restrictive monetary policy or even another rate hike, keeping the pressure on US equities.
- Investors now look ahead to more earnings reports and the latest weekly jobless claims report on Thursday. Source CNBC
Bonds
Yields lower ahead of minutes.
- The yield on the US 10-year Treasury moved lower to 4.18% ahead of key FOMC minutes.
- Traders trying to get an insight into Fed guidance especially after recent data release beat market expectations indicating a robust economy .
- Traders are also keeping a close eye on new debt sales from the Treasury.
OVERNIGHT HEADLINES
Market Closes:
- DOW -180 to 34,765
- SP500 -33 at 4,404
- NASDAQ -156 at 14,927
 image: Trading economics
Asian markets
Asian equities lower.
- In Japan equities lower, the Nikkei 225 Index fell 0.44% to close at 31,626 as Japanese shares tracked losses on Wall Street overnight.
- The latest Fed minutes stressed that upside risks to inflation remain and that further interest rate hikes are still on the table.
- Investors also digested data showing Japanese exports declined for the first time in 29 months in July, while imports dropped the most in nearly three years.
- Nearly all sectors declined.
- In China, the Shanghai Composite rose 0.43% to close at 3,164, reversing losses from earlier in the session.
- Investors remained hopeful that Beijing would offer more forceful stimulus measures to promote growth.
- In the latest developments, Chinese Premier Li Qiang said on Wednesday the government would work to achieve its economic targets for this year.
- He calling for expanding domestic demand and boosting consumption.
- Those remarks came as latest data pointed to further signs of weakness in China’s economy,
- with surprise rate cuts from the central bank failing to appease the market. Source Reuters
Energy
Oil prices higher.
- Brent crude futures held below $84/bl on Thursday after losing nearly 4% over the past three sessions.
- Economic concerns in China and the possibility of further interest rate hikes in the US weighed on the demand outlook in the world’s two biggest oil consumers.
- Weaker-than-expected economic data and a deepening property sector crisis in China added to concerns about the country’s faltering economy,
- FOMC Minutes also showed that US policymakers stressed upside risks to inflation that could warrant a prolonged period of restrictive monetary policy or even another rate hike.
- Meanwhile, EIA data showed that US crude inventories declined by 5.96 million barrels last week, exceeding forecasts for a 2.3 million barrel draw. Source Gulf news.
Metals
Precious metals lower after Fed minutes.
- Gold traded below $1,900/oz to reach $1897/oz.
- The yellow metal hovering at its lowest levels in five months after minutes from the FOMC’s latest meeting prolonged the expected period that the Federal Reserve could start cutting interest rates.
- Fed members believe that upside risks to inflation persist, raising the possibility that interest rates could still be increased.
- Still, some policymakers expressed uncertainty over the duration of policy transmission lags, raising caution of overtightening for the Committee’s more dovish members. Source : Kitco
Currencies
- Dollar higher after FOMC minutes indicates.
- The dollar index rose above 103.5 on Thursday.
- It was trading at its highest levels in two months after minutes of the Federal Reserve’s July meeting showed that policymakers stressed that upside risks to inflation remain.
- The comments leaving the door open to further policy tightening.
- However, some participants flagged the economic risks of pushing rates too far, emphasizing that future rate decisions would depend on incoming data.
- Investors now look ahead to the latest weekly jobless claims report on Thursday to guide the economic and monetary policy outlook. Source : Forexlive
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