Afternoon Note
28 August 2023
Support & Resistance Levels
Data This Week
Market Highlights
Market Close
South Africa
Global Markets
Overnight Headlines
Support & Resistance Levels
ZAR trading weaker in early Monday trading ahead of a bumpier data week.
Today’s Market Support and Resistance Levels:
Data This Week
Monday
16H30 US DALLAS FED MANUFACTURING INDEX -21.6 EXPECTED VS -20 PREVIOUS.
Tuesday
16H00 US JOBS OPENING 9.793mio expected 9.582 previous.
Wednesday
08H00 SA M3 MONEY SUPPLY 10.8% EXPECTED VS 11.15% PREVIOUS.
08H00 SA PRIVATE SECTOR CREDIT YOY 6.2% EXPECTED 6.25%.
14H00 GERMAN INFLATION YOY 6% EXPECTED 6.2% PREVIOUS.
14H15 US ADP ( PRIVATE PAYROLLS) 195K PREVIOUS VS 324K EXPECTED.
14h30 US GDP 2.2% EXPECTED VS 4.1% PREVIOUS QoQ.
14H30 US PCE 3.8% EXPECTED VS 4.9% PREVIOUS.
16H00 US PENDING HOMESALES -12% ESTIMATE VS -15.6% EXPECTED.
Thursday
11H00 EU INFLATION RATE 5.1% ESTIMATE VS 5.3% PREVIOUS.
11H30 SA PPI INFLATION 2.9% EXPECTED VS 4.8% PREVIOUS.
14H30 US CORE PCE 4.2% VS 4.1% PREVIOUS YOY.
14H30 US JOBLESS CLAIMS 235K VS 230K PREVIOUS.
15H45 US CHICAGO PMI 44 VS 42.8 PREVIOUS.
Friday
14H30 US NON FARM PAYROLLS 170K VS 187K PREVIOUS.
14H30 US UNEMPLOYMENT RATE 3.5% VS 3.5% PREVIOUS.
16H00 US ISM MANUFACTURING 47 EXPECTED VS 46.4.
Market Highlights
The Rand retreated in early morning trading to reach R18.74/$.
After Friday’s volatility, the ZAR opened at R18.5000/$ before losing ground when London entered the market.
The Dollar finding early support this week, especially after Jackson Hole and Powell on Friday.
The Fed Chair Jerome Powell, called for higher rates if inflation fails to reach the intended 2% goal.
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- Powell made it clear, that the target is “non-negotiable” and that the Fed “WILL” achieve its objective.
- The Chair also made it clear, that the Fed will also be data dependent.
- He clearly mentioned the “tightness” in the jobs market as well as elevated US PCE level.
- PCE – personal consumption expenditure , remains the FED’s preferred inflation gauge.
On the back of these comments, this week will likely be an extremely volatile week for the ZAR.
On the data front , we have a stacked week with US GDP , US PCE and the much feared Non-farm payrolls due on Friday.
Technically , we remain inside the range of 18.5000-18.8000 and a break either side will attract interest.
Market Close
DOW
+247 to 34.346
SP500
+29 to 4.405
NASDAQ
+126 at 14.962
Overnight Trading
image: Trading economics
South Africa
BRICS – SA CHINA
Electricity Minister Kgosientsho Ramakgopa said China would help SA move with speed to modernise electricity infrastructure to immediately minimise the effects of load shedding.
At the annual BRICS Summit held in the country last week, the minister signed a joint memorandum of cooperation with eight Chinese power companies to help solve the energy crisis in the country.
China has also committed to granting South Africa hundreds of millions of rands to assist the country’s transition to cleaner energy production.
He added that China was not the only international partner planning to alleviate the country from it’s energy crisis.
“We’re also having significant conversations with other BRICS member states and other major European countries and they’re planning an international partners group, these include the US, Germany and France – they are assisting also on the transmission side. The minister also said this is not just isolated to a conversation to China but the China one was able to come to into a concrete agreement.”
Source: EWN.
CoCT ELECTRICITY TARRIFS
In the face of protest action on 26 August, the City of Cape Town fiercely defended its 17.6% increase in electricity tariffs but conveniently left out crucial information.
The increase exceeds the 15.1% guideline set by energy regulator Nersa for all municipalities, and a specific decision by it not to grant the city a bigger increase.
More than 500 fuming residents showed up at the Civic Centre, where a memorandum of demands was presented to three city officials.
“Mayor Geordin Hill-Lewis was apparently too busy to receive it personally, which angered the protestors,” says Sandra Dickson.
Dickson is a founder of the organisation Stop City of Cape Town, one of 23 represented at the rally.
Angry residents protest defiance of Nersa guideline.
Source: News24.
Global Markets
US stock futures rose on Monday to start the final trading week of August.
Futures contracts tied to the three major indexes were all up about 0.2%.
On Friday, the S&P 500 and Nasdaq Composite gained 0.67% and 0.94%, respectively, with both benchmarks notching their first winning week in four.
Those moves came as Federal Reserve Chair Jerome Powell pointed to signs of continued strength in the US economy at his Jackson Hole speech.
Powell also indicated that the central bank would “proceed carefully” with additional hikes.
He said the Fed is “prepared to raise rates further and intend to hold policy at a restrictive level” until inflation moves to 2%.
Investors now look ahead to more economic data as August comes to a close, headlined by the monthly jobs report on Friday.
The yield on the 10-year US Treasury note held near the 4.25% mark.
It remains elevated and slightly below the 15-year high of 4.34% touched on August 21st as credit markets continued to assess the monetary policy outlook for the Fed.
Powell stated that current borrowing costs are well above the mainstream estimates of neutrality.
While uncertainty over the duration of lags for policy transmission supported bets that the Fed will exhort caution against overtightening.
Still, Powell emphasized that another rate hike could be warranted should above-trend growth patterns persist, after underscoring the priority to bring inflation down to the 2% level.
In the meantime, risks remain for bond prices in the secondary market due to concerns about higher long-dated debt issuance from the Treasury this month.
Source: CNBC
Overnight Headlines
Asian Markets
Asian equities higher after Wallstreet rally.
In Japan , the Nikkei 225 Index jumped 1.73% to close at 32,170, recouping most of the losses from the previous session.
The market taking cues from a positive lead on Wall Street as Federal Reserve Chair Jerome Powell pointed to signs of continued strength in the US economy at his Jackson Hole speech.
Powell added that the central bank would “proceed carefully” with additional hikes.
Technology stocks rebounded from sharp losses on Friday.
Strong gains were also seen from other index heavyweights.
The Shanghai Composite cut some gains to close 1.13% higher at 3,099, as investors were assessing China’s new measures to enhance its capital markets.
Investors considering persistent economic concerns and worries about potential interest rate hikes by the US Fed.
The Shenzhen Component has also rebounded from multi-month lows, gaining 1.01% to reach 10,233.
Among Beijing’s measures were the halving of the stamp duty on stock trading, which became effective today.
Source : CNBC
Energy
Oil prices higher.
Brent crude futures rose toward $85/bl on Monday.
Prices gaining for the third straight session as risk sentiment improved, though investors remain cautious about the prospect of higher global oil supply and weaker demand.
Declining oil inventories and supply cuts from OPEC+ member countries also kept the market supported.
Meanwhile, the prospect of easing sanctions on Iran and Venezuela raised hopes that additional crude supplies could hit the market.
Investors also cautiously awaited manufacturing PMI figures for major economies amid lingering concerns about a global economic slowdown.
Moreover, Federal Reserve Chair Jerome Powell said that inflation remains “too high” and that the central bank is “prepared to raise rates further if appropriate.”
Source: Gulf News
Metals
Precious metals range trading.
Gold stabilized around $1,915/oz on Monday as investors continued to weigh Federal Reserve Chair Jerome Powell’s Jackson Hole speech.
The metals advance slowed after hawkish comments from Jerome Powell.
Powell said they are “prepared to raise rates further if appropriate, to get inflation down to 2%.
Key US data this week likely to further drive price action this week.
Source: Kitco
Currencies
Dollar higher.
The dollar index steadied around 104 on Monday, hovering close to its highest levels in almost three months as investors continued to weigh Federal Reserve Chair Jerome Powell’s Jackson Hole speech.
Powell said they are “prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level” until inflation moves sustainably lower towards the objective as it remains too high.
Investors now look ahead to more economic data this week, including the monthly jobs report, the PCE price index and ISM Manufacturing PMI in the US.
Source : Forexlive