Afternoon Note
18 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
Nothing of significance
Tuesday
11H00 EU INFLATION 5.3% EXPECTED YOY
14H30 US BUILDING PERMITS 1.44MM
Wednesday
08H00 UK INFLATION 7.1% CPI YOY EXPECTED
10H00 SA INFLATION 4.9% EXPECTED VS 4.7 PREVIOUS
13H00 SA RETAIL SALES -0.5% MOM EXPECTED VS +0.2% PREVIOUS
20H00 US FED FOMC RATE DECISION – UNCHANGED EXPECTED
20H30 US FED PRESS CONFERENCE
Thursday
15H00 SA SARB MPC UNCHANGED REPO AT 8.25%
16H00 ECB LAGARDE SPEAKS.
Friday
01H30 JP INFLATION AT 13H30
05H00 JP BOJ DECISION
Market Highlights
The Rand weaker as traders remain cautious to assume long ZAR positions ahead of key central bank events.
The risk events remain various central bank policy actions this week as well as SA inflation.
Traders however, braced for the Federal Reserve’s policy decision this week.
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- The US central bank is widely expected to hold interest rates steady on Wednesday.
- The Dollar continues to find support ahead of the FOMC decision.
Later in the week we also have the SARB , BOE , BOJ decision , with only the BOE expected to adjust policy rates.
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- UK inflation remains above 7% , and significantly above the MPC’s 2% target rate.
Oil prices also continuing to advance with US WTI crude futures above $91/bl and North Sea Brent fast approaching $95/bl.
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- Prices are hovering at the highest levels in over ten months.
- Traders citing supply cuts by Saudi’s and Russia and also hopes of a demand recovery in China.
However, the story remains the Fed and the ensuing comments by the Fed governor Jay Powell.
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- Powell reaffirmed the commitment of the central bank to maintain a monetary policy stance.
- The stance is appropriately stringent to steer inflation towards the targeted 2%.
source: Federal Reserve
Buy USDZAR on dips, add through R19.10/$
Market Close
DOW
-288 to 34,618
SP500
-54 to 4,450
NASDAQ
-217 to 15,228
Overnight Trading
Image: Trading Economics
South Africa
ESKOM
Electricity Minister Kgosientsho Ramokgopa is optimistic that four generating units at the Kusile power station will be running by the end of the year.
Ramakgopa announced the return of one of the units on Sunday, leading to load shedding being reduced.
In addition to three generating units that are planned to return to service between October and December from planned maintenance.
Eskom has suffered several breakdowns, with load losses of about 6,000 MW over the past few days.
Planned maintenance has also resulted in some units being out of commission.
South Africa is currently on Stage 2 load shedding which will be ramped up to Stage 4 at 4pm on Monday afternoon.
The power utility said it will ease the power cuts to Stage 2 during the day and repeat this cycle daily.
Source: EWN
BAD WEATHER
The western cape experiencing extreme weather.
Over the weekend, coastal areas around Gordon’s Bay and Kalk Bay in Cape Town experienced excessive wave movement and strong winds.
Mopping up operations are continuing on Monday after severe weather and sea conditions caused havoc along the coast.
An elderly woman died and several others were injured after a huge wave hit them in Wilderness, along the Garden Route.
Initial assessments indicated damage to garage doors of eight properties in the Bikini Beach area of Gordon’s Bay, including sand and debris across the affected areas.
Source: Moneyweb
Global Markets
Stocks
Stock futures in the US were flat to higher on Monday, with traders awaiting the FOMC monetary policy decision due Wednesday.
Most market participants expect the Fed to keep the fed funds rate steady but will be looking for any clues on what the Fed plans to do beyond September, particularly with regard to potential interest rate hikes.
On the corporate front, Apple was up about 0.5% in premarket trading as the company will release the iPhone’s latest operating system, iOS 17.
Also, Blackstone and Airbnb are set to join the S&P 500.
Last week, the Dow inched up 0.12%, while the S&P 500 and Nasdaq Composite lost 0.16% and 0.39%, respectively.
Source: Trading Economics
Bonds
The yield on the US 10-year Treasury note increased to a near 16-year high of 4.3986%.
Further evidence of resilience in the US economy strengthened bets that the Federal Reserve will keep borrowing costs restrictive for a prolonged period.
The market is currently factoring in a 99% likelihood that the Fed will maintain its current interest rates this week, and Fed officials have not ruled out the possibility of a rate increase later in the year.
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 consumer adaptability, and unemployment claims held close to multi-month lows.
Source: CNBC
Overnight Headlines
Asian Markets
Asian flat due to Japanese holiday.
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.
Traders ignoring hotter-than-expected US producer inflation report.
Both benchmark indexes also gained nearly 3% for the week.
All sectors advanced on Friday, with strong gains from index heavyweights such as SoftBank Group (2.1%).
Japanese markets will be close on Monday for a national holiday.
Source: Reuters
Energy
Oil keeps on rising.
Brent crude futures rose above $94/bl, hovering at the highest levels in over ten months.
Traders citing extended supply cuts by Saudi Arabia and Russia, as well as hopes of a demand recovery in China.
OPEC betting with global oil demand growth also expected to rise in the same period for higher prices.
Fresh stimulus measures from Beijing and increased demand from Chinese refiners.
Meanwhile, investors remain cautious ahead of the US Federal Reserve’s policy decision this week.
The Fed is expected to hold interest rates steady but is likely to stay hawkish.
Source: Gulf News
Metals
Precious metals drifting higher.
Gold climbed toward $1,930/oz after the ECB called a halt on its rate hiking cycle.
The US Federal Reserve is also expected to hold interest rates steady on Wednesday, with investors focus on its inflation outlook and next policy steps.
Traders also look ahead to S&P Global PMI figures in the US and several housing indicators.
The BOE and the BOJ will decide on monetary policy this week as well, while the RBA will release minutes of its September meeting on Tuesday.
Last week, Chinese gold prices hit record highs as consumers rushed for the safe-haven asset to hedge against a weakening yuan.
Source: KITCO
Currencies
Dollar back above 105.
The dollar back above 105 on Monday, hovering near its highest levels in six months as investors braced for the Federal Reserve’s policy decision this week.
The US central bank is widely expected to hold interest rates steady on Wednesday, while investors will focus on the Fed’s outlook on inflation and its next policy steps.
Last week, mostly positive US economic data raised hopes that the Fed could engineer a soft landing even if it keeps interest rates higher for longer.
Investors now look ahead to S&P Global PMI figures in the US, as well as several housing indicators.
Markets also await key interest rate decisions from the Bank of England and the Bank of Japan this week.
The dollar drifted flat to slightly negative against other major currencies, with relative weakness seen against antipodean currencies.
Source: Forexlive