Afternoon Note
30 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 Wednesday trading ahead of the New York open.
Today’s Market Support and Resistance Levels:
Data This Week
Monday
Tuesday
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 weaker in early trading, but continues to trade in a relative narrow range ahead of key US data
The local unit starting the JHB session at R18.5300/$, with traders booking early session profits.
However, the Dollar rally ran out of steam, with traders waiting for key US data.
This afternoon we are awaiting the release of private payrolls APD as well as US GDP.
A follow on from last night’s rally was a risk recovery after poor data caused a decline in yields.
- Stocks and Gold continues to rally at the expense of the Dollar and allowing for the ZAR to strengthen.
- The Dollar index falling below 104 to 103.92 after jobs and consumer confidence data disappointed.
Key technical levels: For now we remain inside the range ad for the session.
- A break of R18.6000/$ negates the recent ZAR rally and we can once again target the key R18.8000/$ level.
- Likewise below R18.4000/$, will open up R18.3100/$ (weekly target) and R18.0000/$.
Trade : Range 18.4000-18.8000, Go With Break.
SELL USDZAR on RALLIES
Market Close
DOW
+292 to 34.852
SP500
+64 to 4.497
NASDAQ
+238 at 15.350
Overnight Trading
image: Trading economics
South Africa
WEATHER WARNING
South Africans can expect above-normal temperatures in the coming summer months, says the weather service. Below-normal rainfall is forecast for some regions in the early summer, and farmers need to plan accordingly. A higher demand for cooling is expected, which may also impact energy demand. South Africans can expect a hotter summer than usual, with the SAWS forecasting “above-normal” minimum and maximum temperatures in the months ahead. This could put pressure on the country’s already strained power grid as the need for cooling increases, it warned. Other countries have already experienced this as heat waves struck the northern hemisphere this year. The SAWS further warned farmers in key areas should take precautions such as conserving water. Source: SAWS.
TSHWANE STRIKE
Municipal workers’ strike no longer a labour dispute according to Tshwane mayor Brink. It has been more than four weeks since municipal workers affiliated with the SAMWU downed their tools over the municipality’s announcement that it will not be increasing salaries this year. Tshwane executive mayor Cilliers Brink said that the workers’ strike in the capital was no longer a labour dispute but a large-scale criminal assault on the municipality and its assets. Brink is set to hold a media briefing on Wednesday to give an update on the latest developments regarding the strike. Source EWN.
Global Markets
US stock futures edged higher on Wednesday following up from Tuesday’s large rally.
During regular trading on Tuesday, the Dow rose 0.85%, the S&P 500 +1.45% and the Nasdaq + 1.74%.
Those gains came as weaker-than-expected US consumer sentiment and labour data bolstered bets that the Federal Reserve will likely pause its interest rate hikes in September.
A sharp decline in Treasury yields also boosted technology and other growth stocks, with the benchmark 10-year yield hitting an almost three-week low of 4.1%.
The upcoming release of the jobs report, PCE price index and updated Q2 GDP figures will provide further insights into the potential trajectory of interest rates.
The yield on the 10-year US Treasury note sank to the 4.15% level.
Yields retreating further from the 15-year high of 4.34% touched on August 21st as cooler economic data suggested that the US labour market may be starting to feel the impact of higher interest rates.
Figures from the JOLTs showed that 8.8 million jobs were added to the US economy in July, a 28-month low, remaining above historical averages but missing market forecasts of 9.5 million.
The results aligned with Fed Chair Powell’s Jackson Hole statements that another rate hike could be warranted should above-trend growth patterns persist.
The remarks drove money markets to price in another 25bps rate hike in November following a hold next month.
Source: CNBC
Overnight Headlines
Asian Markets
Asian equities higher after another Wallstreet rally.
In Japan, the Nikkei 225 Index rose 0.33% to close at 32,333.
Japanese shares climbing for the third straight session and tracking Wall Street higher, after softer-than-expected data bolstered bets of a pause in interest rate hikes from the Federal Reserve.
A sharp decline in US Treasury yields also lifted technology and other growth stocks, with the benchmark 10-year US yield hitting an almost three-week low of 4.1%.
Domestically, BOJ board member Naoki Tamura said the central bank needs more evidence that inflation can sustainably meet the 2% target before making any policy changes.
Technology stocks led the charge.
In China, the Shanghai jumped 1.2% to close at 3,136.
The index 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.
Technology and new energy stocks led the advance.
Source : CNBC
Energy
Oil prices remain supported.
US WTI crude futures strengthened above $81/bl on Wednesday.
Prices rising for the fifth straight session after an industry report showed that US crude inventories tumbled by 11.5 million barrels last week.
A hurricane in the Gulf of Mexico also stoked fears of supply disruptions, keeping investors on edge.
The offshore Gulf of Mexico accounts for about 15% of US oil output and about 5% of natural gas production, according to the EIA.
Moreover, oil and other risk assets got a boost from a weakening dollar as signs that the US economy may be cooling.
Traders speculating that the poor data could lighten its policy stance.
Source: Gulf News
Metals
Precious metals higher.
Gold rallied above $1,930/oz as investors continued to worry about Fed 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”.
However, softer data resulted in tumbling US yields send the Dollar lower and the precious metal higher.
This until inflation moves sustainably lower towards the objective as it remains “too high”.
Investors now look ahead to more economic data this week.
Key reports include the monthly jobs report, the PCE price index and ISM Manufacturing PMI in the US.
Source: Kitco
Currencies
Dollar lower.
The Dollar index slipped below 104 on Tuesday as investors bet that weaker economic data could deter central banks from tightening monetary policy.
The US JOLTs report indicated 8.8 million US jobs were added in July, missing the 9.5 million expectation.
Also, the Conference Board’s consumer confidence index fell sharply in August.
Markets now await key job data, the PCE price index, and Q2 GDP figures for insight into interest rate trends.
In his Jackson Hole speech, Federal Reserve Chair Jerome Powell stated readiness to raise rates appropriately to combat inflation.
Source : Forexlive