Afternoon Note
29 August 2023
Support & Resistance Levels
Data This Week
Market Highlights
Market Close
South Africa
Global Markets
Overnight Headlines
Support & Resistance Levels
ZAR trading stronger in early Tuesday trading ahead of the New York open.
Today’s Market Support and Resistance Levels:
Data This Week
Monday
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 recovered sharply in early morning trading to reach R18.43/$.
Traders adding to ZAR positions, after the risk assets rallied sharply following a spike in New York.
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- The local unit breaking through the 18.5000 level, but continues to hover around it.
- JHB traders of the opinion that a sustained break likely to target R18.3000/$.
Markets continuing to trade in large ranges and remain data-sensitive.
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- The SP500, Gold as well as EMFX all gaining at the expense of the Dollar.
This morning, the dollar index eased below 104, sliding for the second straight session as investors cautiously awaited key US economic reports.
Sentiment remains fragile and continue to flip both ways.
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- 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 have broken USDZAR support (R18.5000/$) and appear to be testing it ahead of the New York open.
Trade : SELL USDZAR ON RALLIES
Market Close
DOW
+213 to 34.559
SP500
+27 to 4.435
NASDAQ
+114 at 15.057
Overnight Trading
image: Trading economics
South Africa
ESKOM
Electricity Minister Kgosientsho Ramokgopa says government is planning on establishing ways to work with municipalities that owe Eskom to help pay off the debt.
The news after electricity was disconnected for over five weeks to the Ditsobotla Municipality in the North West as a result of its R5 million debt to the power utility.
Ramokgopa said Ditsobotla was just one of many municipalities that owed Eskom.
“At last count, it was sitting at R62 billion and we did indicate that last time it was sitting at R4.2 billion and it continues to grow. And really, there’s no prospect of this municipalities first extinguishing that debt because of that erosion of the revenue base.”
Source: EWN.
GREY LISTING
Grey listing hits SA crypto arbitrage market.
US crypto exchange stopped accepting deposits from South Africans, pushing the crypto arbitrage premium to 3.5% on Monday.
Kraken stopped accepting deposits from South Africans on Friday last week, following a decision by the exchange’s banking partner to place SA on an anti-money laundering blacklist.
The crypto arbitrage premium, which last week ranged between 0.7% and 1.5%, spiked to 3.5% on Monday on the news.
This is seen as a direct consequence of SA being ‘grey listed’ in February by the Financial Action Task Force (FATF).
The grey listing for SA’s lack of compliance with international standards on money laundering and terrorist financing.
Source: Moneyweb.
Global Markets
US stock futures holding onto gains after the major averages finished higher during Monday’s regular session.
Futures contracts tied to the three major indexes were all trading near breakeven.
In regular trading on Monday, the Dow rose 0.62%, the S&P 500 gained 0.63% and the Nasdaq jumped 0.84%.
All three benchmarks climbing for the second straight session.
Major Dow component 3M surged 5.2% on news that the company has tentatively agreed to pay $5.5 billion to resolve more than 330,000 lawsuits related to its defective earplugs.
Investors now look ahead to the monthly jobs report later this week, as well as the PCE price index and ISM Manufacturing PMI.
The yield on the 10-year US note held near the 4.25%, remaining slightly below the 15-year high of 4.34% touched on August 21st.
Credit markets continued to assess the monetary policy outlook for the Fed and gauge the impact that higher bond supply may have on their bidding levels.
During the Fed’s Jackson Hole Symposium, Chairman Powell stated that current borrowing costs are deemed restrictive.
He added 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
In Japan, the Nikkei 225 rose 0.18% to close at 32,227, climbing for the second straight session and taking cues from a positive lead on Wall Street.
Investors also digested data showing Japan’s unemployment rate surprisingly increased to 2.7% in July from 2.5% in June.
The data defying expectations for no change, while the jobs-to-applications ratio fell to a 13-month low of 1.29.
Nearly all sector s participated in the advance.
In China, the Shanghai jumped 1.2% to close at 3,136, rising for the second straight session after China introduced new measures this week to boost capital markets and shore up investor confidence.
Beijing cut the stamp duty on stock trading by half.
Meanwhile, investors remain cautious ahead of the release of Chinese manufacturing PMI figures later this week, which are expected to confirm underlying weakness in the country’s economy.
Technology and new energy stocks led the advance.
Source : CNBC
Energy
Oil prices remain supported.
US WTI crude futures steadied around $80/bl on Tuesday amid a lack of market-moving cues.
Investors await more economic reports from the US and China this week for clues on the outlook for energy demand in the world’s two biggest oil consumers.
In addition traders continued to assess the monetary policy outlook after the FED said further interest rate hikes are possible if inflationary pressures persist.
Investors now look ahead to key US jobs and inflation data this week, as well as manufacturing PMI figures for both the US and China.
On the supply side, output cuts from OPEC+ producers Saudi Arabia and Russia continued to support oil prices, though speculations that the US could ease sanctions on Iran and Venezuela weighed.
Source: Gulf News
Metals
Precious metals higher.
Gold stabilized around $1,920/oz as investors continued to worry about Federal Reserve Chair Jerome Powell’s Jackson Hole speech.
The US economic data this week likely to guide the interest rate outlook.
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”.
However, he clarified that they would “proceed carefully” with additional hikes as he noted both progress made on easing price pressures as well as risks from the surprising strength of the US economy.
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: Kitco
Currencies
Dollar lower.
The dollar index eased below 104 on Tuesday.
The buck sliding for the second straight session as investors cautiously awaited a slew of US economic reports this week that could influence the interest rate outlook.
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”.
However, he clarified that they would “proceed carefully” with additional hikes as he noted both progress made on easing price pressures.
Source : Forexlive