Afternoon Note

29 September 2023

Support & Resistance Levels

Data This Week

Market Highlights

Market Close

South Africa

Global Markets

Overnight Headlines

ZAR gains in early JHB trading as Dollar slide continues.

Today’s Market & Resistance Levels

Data This Week

Monday

Tuesday

16H00 US NEW HOME SALES DATA 0.7MILLION EXPECTED

19H30 FED BOWMAN SPEAKS

Wednesday

01H50 BOJ MINUTES

14H30 US DURABLE GOODS ORDERS -0.5% MOM -5.2% PREVIOUS

Thursday

11H30 SA PRODUCER INFLATION MOM 0.5% EXPECTED

11H30 SA PRODUCER INFLATION YOY 3.7% EXPECTED VS 2.7% YOY

14H30 US GDP GROWTH 2.1% EXPECTED QOQ VS 2% PREVIOUS

14H30 US INITIAL JOBLESS CLAIMS 215K VS 201K PREVIOUS

Friday

14H30 US PCE 3.5% EXPECTED VS 3.3% PREVIOUS

14H30 US CORE PCE 0.2% EXPECTED VS 0.2% PREVIOUS

Market Highlights

ZAR gains continued in early trading, allowing the local unit to gain more than 2% and reaching R18.75/$

Traders booked some profits and weak longs were liquidated, in what proved to be rapid unwind of Dollar longs.

The market once again in the established range of R18.7500-R19.1500 and looking for more direction ahead of the US PCE data release at 14h30.

    • PCE Month on month expected 0.5% vs 0.2% previous.
    • PCE Year on Year expected 3.5% vs 3.3% previous.
    • US Chicago PMI 47.6 expected vs 48.7 previous.

Month & quarter-end reporting allowing for “buy-side” firms to support the Risk asset market.

    • The Dollar lower across the board, losing ground vs the Euro, Pound and Yen.
    • In addition, US yields retreating from recent highs with the 10YT at 4.55%, with levels last seen in July 2007.
    • Arresting the recent bond-sell were conflicting comments from Fed governors.
    • Richmond Fed, President Barkin, said it is too early to know if another rate increase would be needed this year, while Chicago Fed, Goolsbee, said the central bank was at risk of overshooting on interest rates.

NB: We are also faced with month-end and quarter-end reporting, so as expected we had a risk rally this session.

Technically, the ZAR back in its larger range 18.7500-19.1500.

    Trade: BUY USDZAR towards the bottom of the range and go with break

    Market Close

    DOW
    +116 to 33,666

    SP500
    +250 at 4,299

    NASDAQ

    +108 to 14,750

    Overnight Trading

    Image: Trading Economics

    South Africa

    SA FDI

    SA’s foreign direct investment inflows rise to R53.8bn in Q2.

    Up from inflows of R0.5bn in the first quarter, central bank data showed on Thursday.

    South Africa recorded foreign direct investment inflows of R53.8 billion ($2.8 billion) in the second quarter of 2023.

    It was up from inflows of R0.5 billion in the first quarter, central bank data showed on Thursday.

    The SARB said in its Quarterly Bulletin that the acquisition of a domestic beverage company by a non-resident firm contributed to the increase.

    Heineken said in April that it had completed the purchase of wine and cider company Distell.

    Second-quarter portfolio investment outflows fell to R4.6 billion from R32.0 billion in the previous quarter, the Quarterly Bulletin said.

    CHICKEN AND EGG SHORTAGE

    Chicken and egg prices set to soar ahead of festive season.

    Latest strain of bird flu virus is more devious, and has hit the inland region where chicken densities are greater.

    Industry insiders and economists have confirmed that SA shoppers will have to stomach higher poultry meat and egg prices.

    This as the sector battles its worst highly pathogenic avian influenza (HPAI) outbreak yet.

    The severity of the anticipated price shocks is as yet unclear.

    A forecast that we will see a shortage of chicken meat going into the festive season and that will also put upwards pressure on the prices of chicken meat.

    Source: Moneyweb

    Global Markets

    Stocks

    US stock futures held steady on Friday, with the major averages set to book sharp monthly losses ahead of the last trading day of September.

    In regular trading on Thursday, the Dow rose 0.35%, the S&P 500 gained 0.59% and the Nasdaq jumped 0.83%, materials and consumer discretionary.

    Those gains came as Treasury yields, the dollar and oil prices pulled back from recent highs.

    Investors also digested data showing the US economy maintained a fairly solid pace of growth at 2.1% in the Q2.

    Investors now look ahead to the Fed-preferred PCE price index report on Friday for more clues.

    For September, the S&P 500 and Nasdaq Composite are currently down 4.61% and 5.94%, respectively, on track for their worst month this year.

    The Dow also lost 3.04% so far this month.

    Source: Trading Economics

    Bonds

    The yield on the US 10-year Treasury note retreated to 4.5% on Friday, after touching 4.68% the day before which was the highest since July 2007.

    Comments from Fed officials helped to ease the bond sell-off. Richmond Fed, President Barkin, said it is too early to know if another rate increase would be needed this year.

    In addition, Chicago Fed’s, Goolsbee, said the central bank was at risk of overshooting on interest rates.

    Traders await the PCE inflation report due later in the day for further clues on inflationary pressures and the Fed’s rate trajectory for the rest of the year.

    However, there are growing expectations that borrowing costs will remain elevated for a longer period.

    Meanwhile, traders continue to follow the debt crisis in the US, with funding set to expire tomorrow.

    Source: Bloomberg 

     

    Overnight Headlines

    Asian Markets

    Stocks rebound on last day of trading.

    In Japan, the Nikkei 225 shed 0.05% to close at 31,858, extending losses from the previous session as investors reacted to mixed economic data in Japan.

    Data showed that Tokyo’s core inflation rate, a leading indicator of nationwide price trends, came in at 2.5% in September, lower than the 2.6% expected by analysts.

    Investors also digested Japanese unemployment, industrial output and retail sales data for August.

    The Nikkei 225 Index dropped 2.3% for its third straight monthly decline in September.

    Source: Reuters

    Energy

    Oil prices higher and pushing towards $100/bl.

    WTI crude futures traded around $92 per barrel on Friday and were set to close both the month and the quarter higher.

    Traders citing tightening global supplies outweighed demand uncertainties.

    The US oil benchmark is up about 10% so far in September and about 30% in the third quarter.

    Oil rallied as OPEC+ majors Saudi Arabia and Russia extended a combined supply cut of 1.3 million barrels per day through the end of the year.

    Russia also imposed restrictions on fuel exports to stabilize its domestic market, while US crude inventories continued to decline.

    Investors now look ahead to an OPEC meeting on October 4 for more clues on production policies.

    Source: GULF news

    Metals

    Precious metals slightly higher.

    Gold held at over six-month lows below $1,870/oz on Friday and was set to decline for the second straight month.

    However , prices remained under pressure and weighed down by a strong dollar and surging Treasury yields.

    Data on Thursday also showed that the US economy maintained a fairly solid pace of growth in the second quarter and the US labour market remained solid.

    Last week, the Fed kept interest rates unchanged and subsequent comments from several Fed officials have also reinforced the notion that the central bank will need to hike rates further.

    Investors now look ahead to the Fed-preferred PCE price index report on Friday for further clues.

    Source: KITCO

    Currencies

    Dollar rally stalls.

    The dollar index eased to around 106 on Friday but was still set to advance for the second straight month.

    It was underpinned by growing optimism that the US economy could withstand higher interest rates better than other economies.

    Data on Thursday showed that the US economy maintained a fairly solid pace of growth at 2.1% in the second quarter.

    Initial jobless claims rose less than expected to 204,000 last week, adding to signs of a strong jobs market.

    Investors now look ahead to the Fed-preferred PCE price index report on Friday for further clues.

    Source: Forexlive