Afternoon Note
23 August 2023
Support & Resistance Levels
Data This Week
Market Highlights
Market Close
South Africa
Global Markets
Overnight Headlines
Support & Resistance Levels
ZAR gains continued reaching R18.6300/$ in early Wednesday trading.
Today’s Market Support and Resistance Levels:
Data This Week
Tuesday
Wednesday
10h00 SA CPI MOM 1.2% EXPECTED VS 0.2% PREVIOUS
10h00 SA CPI YOY 5.0% EXPECTED VS 5.4% PREVIOUS
10h00 SA CPI CORE YOY 4.9% EXPECTED VS 5.0% PREVIOUS
Thursday
14H30 US DURABLE GOODS MOM -4% VS 4.7% PREVIOUS
14H30 US INITIAL JOBLESS CLAIMS 240K VS 239K
Friday
16H05 JACKSON HOLE – JEROME POWELL SPEECH
Saturday
JACKSON HOLE SYMPOSIUM
Market Highlights
Rand gains continued on the back of demand for high yielding emerging market currencies (EMFX) ahead of the BRICS summit in Johannesburg.
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- After breaking out of the recent R18.9000-19.2000/$ range, the local unit consolidated gains with a sharp move to R18.63 in Joburg trading.
- In what appears to be a “decoupling” from the Dollar, the ZAR all but ignores Greenback gains vs the Euro and Pound.
- So far this week gains for; The ZAR, Mexican Peso, Indian Rupee, Brazilian Real and Russian Ruble vs the Dollar.
Earlier this morning, German PMI data shocked the market lower, and the Euro declined sharply vs the Dollar and Pound.
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- Traditionally this would be a negative for the ZAR, but the local unit brushing off the move in line with other Emerging market currencies.
- In addition, STATS SA reporting SA CPI at 4.7% YOY vs 5% expected and well inside the SARB’s 3-6 % inflation targeting band.
- Any hold from the SARB is likely to curtail ZAR gains and result in some weakness if the FED remains on its hawkish path.
Market Close
DOW
-174 to 34.288
SP500
-12 at 4.387
NASDAQ
+8 at 15.008
Overnight Trading
image: Trading economics
South Africa
BRICS BANK
Reform global financial institutions says Ramaphosa as BRICS bloc gathers.
‘BRICS bank’ has already become a credible development finance institution, says Putin, who made a surprise virtual appearance.
Global financial institutions must be required to stage a reform if they are to be responsive to the challenges borne by developing countries.
This is according to Ramaphosa, president of the host nation of the 15th annual BRICS Summit.
“We require a fundamental reform of the global financial institutions so that they can be more agile and responsive to the challenges facing developing economies,” he said.
Ramaphosa spoke in a leader’s address alongside other BRICS heads of state at the summit.
He added that global financial institutions such as the World Bank and the IMF have often come to the aid of developing countries, but often at a steep cost and with complex conditions attached.
“In this respect, the New Development Bank, established by BRICS countries in 2015, is leading the way,” Ramaphosa said.
Source: Moneyweb.
SA INFLATION
STATS SA reporting that SA July inflation falls more than expected.
Headline consumer inflation fell to 4.7% year on year in July from 5.4% in June.
CPI slowed to the lowest level in two years last month, beating expectations and providing room for the central bank to continue keeping interest rates on hold.
Forward-rate agreements starting in a month, show a 90% chance of a Zero hike when the SARB meets next time.
Analysts are quick to point on that the data, reinforces their views that the Sarb will be on hold for the rest of 2023.
Source: Bloomberg.
Global Markets
Stock futures lower in early London trade.
US stock futures were lower on Wednesday as investors look ahead to the latest batch of corporate earnings reports from major firms including Nvidia.
In regular trading on Tuesday, the Dow and S&P 500 lost 0.51% and 0.28%, respectively.
Markets were dragged lower by banks after S&P Global Ratings joined Moody’s Investors Service and downgraded some US banks due to a challenging economic environment.
Meanwhile, the Nasdaq Composite inched up 0.06% as gains in Tesla (+0.8%) and Apple (+0.8%) outweighed losses in Nvidia (-2.8%) and AMD (-2.4%).
Markets also await US new home sales and purchasing data on Wednesday, as well as the start of the two-day FED symposium in Jackson Hole, Wyoming, beginning Thursday.
Yields continue to spike.
The yield on the 10-year US Treasury moved below the 4.275% mark after hitting a near 16-year high of 4.342% on August 21st.
Investors continue to assess the extent of the hawkish outlook for the Federal Reserve and gauge the impact that higher bond supply may have on their bidding levels.
Investors took advantage of the latest slump in Treasury securities amid bets that increasing signs of a slowing US economy will force the Fed to refrain from engaging in further monetary tightening.
Strong economic data and Treasury supply continue to place a premium on yields.
Source: CNBC.
Overnight Headlines
Asian Markets
Asian equities are higher.
In Japan, the Nikkei 225 Index rose 0.48%, with both benchmarks rising for the third straight session, as investors cheered upbeat Japanese private business activity figures.
Data showed that the country’s manufacturing activity improved in August, while services activity expanded at the fastest pace in three months.
Still, investors remain cautious ahead of earnings and the Federal Reserve symposium in Jackson Hole.
Notable gains were seen from index heavyweights. Source: Reuters
In China, the Shanghai Composite fell 1.34% to close at 3,078, erasing gains from the previous session as economic uncertainties in China.
Earlier, a weaker-than-expected response from authorities to support growth weighed on sentiment.
Investors also turned cautious ahead of an earnings release from artificial intelligence stock Nvidia and the Federal Reserve symposium in Jackson Hole, Wyoming this week.
Energy
Oil prices are lower.
Oil prices declined, with Brent crude futures down to below $83/bl.
The lowest in three weeks due to concerns that a restrictive monetary policy in the US and an economic slowdown in China could hurt energy demand.
The focus shifted to the upcoming annual symposium of central bankers at Jackson Hole this week, where policymakers might provide insights into the future direction of interest rates.
Sluggish demand in top crude importer China and the lack of forceful policy measures from Beijing to bolster growth also weighed on sentiment.
Additionally, industry data showed that US crude inventories dropped by about 2.4 million barrels last week, smaller than the 2.9 million barrel draw expected by analysts.
The UK oil benchmark reached a six-month high of $88 on August 9 boosted by supply cuts by Saudi Arabia and Russia.
Source: Gulf news
Metals
Precious metals are higher.
Gold stabilized around $1,900/oz on Wednesday as investors avoided making big decisions ahead of an annual symposium of central bankers at Jackson Hole.
Still, the metal remained close to its weakest levels in five months amid a strong dollar and Treasury yields, driven by expectations that the Federal Reserve will keep its policy restrictive for some time.
Minutes of the Fed’s July meeting released last week suggested further interest rate increases could be ahead due to upside risks to inflation.
On the other hand, the bets on more hikes from the ECB have reduced after fresh PMI data for major European countries showed a deeper contraction in business activity.
Source: Kitco
Currencies
Euro dropping sharply.
The euro extended losses towards $1.0800/oz.
The single currency touched its weakest level since June 14, after data showed German and Eurozone business activity slumped more than expected in August.
Eurozone business activity contracted by the most since November 2020, led by the steepest German contraction in over three years, with the service sector unexpectedly falling into contraction territory.
Currently, expectations indicate a high likelihood that the European Central Bank will pause its current tightening cycle at its September meeting.
Simultaneously, US interest rates are poised to remain higher for an extended period, driven by substantial upside risks to inflation.
Source : Forexlive