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Good Afternoon
The ZAR continues to consolidate around the R19/$ level ahead of BRICS and Jackson Hole this week.
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Market Highlights:
Rand consolidation continued ahead of the two major events this week.
- The ZAR remained in a narrow range ahead of SA’s hosting of the BRICS summit as well as the Central Bankers symposium at Jackson Hole Wyoming USA.
- Early in the session the local unit lost ground due to the nervousness around the Chinese economy after more PBoC intervention.
- The Rand reaching R19.0500 before falling back towards the 19 handle.
- Risk assets rebounding, but traders viewing the bounce as technical due to profit taking and not anything fundamental given the elevated levels of US yields.
- The US10YT remains at 4.30%. Gold also lower at $1892/oz.
- Traders aware of increased risks later in the week and not assuming large positions early on.
- US Private sector PMIs and Fed Chair Powell could green light a September Fed rate hike.
- And of course the closely watched BRICS, where SA have called for more members, with Saudi Arabia an applicant.
- Yields however the key drivers of asset pricing and sentiment and rising Dollar yields imply a risk-off environment.
- The ZAR will continue to underperform in this environment.
- Trade : BUY USDZAR on DIPS
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SOUTH AFRICA
PHALA-PHALA
- The SARB cleared President Cyril Ramaphosa of any wrongdoing in its investigation into the millions of undisclosed foreign currency stolen from his Phala Phala farm in 2020.
- Governor Lesetja Kganyago released the report via the bank’s website on Monday morning.
- In it, it says Ramaphosa was found to have not contravened the Exchange Control Regulations.
- “On the facts available to it, the SARB finds that there was no perfected transition and thus the SARB cannot conclude that there was no contravention of the Exchange Control Regulations. Source : EWN
BRICS CHINA SA
- President Cyril Ramaphosa says South Africa is looking to strengthen trade ties with China as it marks its 25th anniversary of diplomatic ties between the two countries.
- Chinese President Xi Jinping will make his fourth state visit to South Africa on Tuesday ahead of the BRICS Summit.
- In his weekly newsletter, Ramaphosa said South Africa wanted to address the trade deficit between the two countries.
- Bilateral trade with China has grown from less than one billion rand in 1998 to over R614 billion in 2022.
- President Ramaphosa said relations between South Africa and China were underpinned by a 10-year strategic programme of cooperation which will end in 2029. Source Moneyweb
GLOBAL MARKETS
Stocks
Stocks rebound on the back of technical profit taking.
- US stock index futures pointed to a higher open on Wall Street on Monday.
- This after a sharp selloff last week as all eyes turn toward the upcoming annual Jackson Hole symposium.
- Traders eagerly awaiting further clues regarding the trajectory of interest rates are eagerly awaited.
- In pre-market trading, Nvidia added 2% after HSBC raised its price target on the stock to $780. Also, growth-oriented stocks rose, with Tesla up nearly 3%.
- Palo Alto Networks, a cybersecurity company, surged 12.5% in its stock price due to its higher-than-anticipated forecast for billings.
Bonds
Yields continue to spike.
- The yield on the 10-year Treasury advanced to the 4.3% mark on Monday, approaching the 15-year high touched on August 17th.
- Markets continued to fret about the hawkish outlook for the Federal Reserve and higher bond supply from the US Treasury.
- Stronger-than-expected retail sales for July underscored the resilience of the US consumer.
- Economic data resulting in a selloff in bonds following the release of minutes from the FOMC’s latest meeting,
- which stressed that there are upside risks to inflation that could warrant further rate hikes, pressuring Treasuries in the secondary market.
- Yields also remained higher due to concerns of higher bond supply after the government increased the amount of debt auctioned at the beginning of the month. Source: CNBC
OVERNIGHT HEADLINES
Market Closes:
- DOW +25 to 34,500
- SP500 -0.65 at 4,370
- NASDAQ -26 at 14,927
 image: Trading economics
Asian markets
Asian equities rebound.
- In Japan equities lower, the Nikkei 225 Index rose 0.37% to close at 31,566, recouping some losses from last week as risk sentiment improved.
- Nearly all sectors participating in the advance.
- Still, investors remain cautious ahead of US Federal Reserve Chair Jerome Powell’s address at the central bank’s annual symposium in Jackson Hole, Wyoming later this week.
- On Friday, data showed that Japan’s headline inflation rate came in above forecasts in July, while the core inflation print slowed as expected, but remained above the Bank of Japan’s target.
- In China, the Shanghai Composite dropped 1.24% to close at 3,093, with both benchmarks sliding to their lowest levels in at least seven months.
- Earlier, the People’s Bank of China lowered its one-year loans prime rate by 10 basis points to a record low of 3.45%, but unexpectedly kept the five-year loan prime rate unchanged at 4.2%.
- The decision came after China’s central bank urged financial institutions over the weekend to increase lending in order to shore up an ailing economy. Source : Reuters
Energy
Oil prices higher.
- US WTI crude futures rose above $81 per barrel on Monday.
- Prices gaining for the third straight session on growing optimism that Chinese authorities would introduce more policy measures to boost economic growth.
- Over the weekend, China’s central bank urged banks to increase lending in a bid to shore up the economy.
- The central bank also lowered its one-year loan prime rate by 10 basis points to a record low of 3.45% on Monday, while keeping its five-year loan prime rate unchanged at 4.2%.
- Signs of tightening in the physical market also buoyed oil prices, with US crude inventories recording another large drawdown in the latest report. Source Gulf news.
Metals
Precious metals continue lower
- Gold remained below $1,900/oz on Monday, hovering close to its lowest levels in five months on a stronger dollar and expectations of further increases in borrowing costs in the major economies.
- Minutes of the Federal Reserve’s July meeting released last week suggested further interest rate hikes could be ahead due to upside risks to inflation.
- Meanwhile, investors braced for an annual gathering of central bankers at Jackson Hole later this week to guide the economic and interest rate outlook.
- In the physical market, premiums on gold in China jumped to the highest since December 2016 last week.
- Traders citing the move after China’s central bank lowered its one-year loans prime rate by 10 basis points to a record low of 3.45% at its August fixing. Source : Kitco
Currencies
- Dollar higher after FOMC on back of more risk aversion.
- The dollar index remained above 103 on Monday.
- The buck hovering close to its highest levels in over two months as investors look ahead to Jerome Powell’s at the central bank’s annual symposium in Jackson Hole, Wyoming later this week.
- Meanwhile, China’s central bank lowered its one-year loans prime rate by 10 basis points to a record low of 3.45% at its August fixing, but kept the five-year loan prime rate unchanged at 4.2%.Source : Forexlive
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