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Midday NOTE

Good Afternoon

The ZAR traded weaker on Thursday morning reaching R18.68/$

SOUTH AFRICA

ANC VS EFF

• SARS has denied claims that President Cyril Ramaphosa and Commissioner Edward Kieswetter met to discuss investigating attendees of the EFF gala dinner.
  • EFF leader Julius Malema on Wednesday claimed Ramaphosa wanted SARS to investigate the tax affairs of the gala’s sponsors and attendees. 
  • SARS reiterated Kieswetter’s stance against political interference.
  • The commissioner said he would resign if he received unlawful instructions from politicians. 
  • Malema claimed “reliable” sources informed him that Ramaphosa and Kieswetter met on Monday to discuss investigating the attendees,
    • “due to extravagance and flamboyance displayed” during the gala dinner. Source : EWN

SERVICE DELIVERY PROTESTS

• Angry residents have looted a truck on the N12 highway near Eldorado Park.
  • The angry group of residents took to the streets on Monday and Tuesday over years of failing service delivery in the area.
  • So far, a vehicle was set alight and one teenager has died as a result of the demonstrations turning violent.
  • Police said that they were aware of the looting incident and more officials were being dispatched to the scene. Source : EWN

GLOBAL MARKETS

Stocks

• Equities lower after US downgrade

  • US stock futures steadied on Thursday after the major averages suffered sharp declines during Wednesday’s regular session.
  • Traders citing Fitch’s recent downgrade of the United States’ long-term credit rating.
• In regular trading on Wednesday, the Dow fell 0.98%, the S&P 500 dropped 1.38% and the Nasdaq Composite sank 2.17%.
  • 9 out of the 11 S&P sectors ending lower led to the downside by technology, communication services and consumer discretionary.
• Those losses came as Fitch cut its rating on U.S. debt from AAA to AA+.
  • The result a spike in Treasury yields weighed on sentiment further.
  • Investors now look ahead to more earnings reports and economic data on Thursday.

Bonds

• The yield on the 10-year US Treasury note rose above 4.11% in August, testing levels last seen in November 2022 and adding nearly 30bps since the start of the third quarter.
  • Traders citing ample bond issuance and an increasingly hawkish outlook for the Fed.
  • The US Treasury boosted the size of its long-term debt issuance to $103 billion in the second week of August, more than markets expected, to make up for its increasing borrowing needs.
  • The move underscored the US’s reliance on higher debt and concerns of incoming fiscal deterioration,
    • contributing to Fitch’s decision to downgrade the country’s sovereign credit rating from AAA to AA+.
       
• Meanwhile, the ADP report showed that 324k private-sector jobs were added to the US economy in July.
  • The results magnified the US’s resilience to higher interest rates, spurring some bets of another rate hike this year.
  • The data magnifying evidence of a strong labour market after the JOLTS pointed to strong job openings and jobless claims sank to multi-month lows.

Market Close:

• DOW -348 to 35,282
• SP500 -63 to 4,513
• NASDAQ -310 to 13,973

OVERNIGHT HEADLINES

  image: Trading economics
 

Asian markets

• Asian equities lower after Wall Street sell-off.  
  • The Fitch downgraded continues to rattle markets.
    • In Japan, the Nikkei 225 Index dropped 1.68% to close at 32,159, falling for the second consecutive session and tracking losses on Wall Street overnight.
      • The Fitch downgrade of the US’s credit rating and a spike in Treasury yields weighed on investor sentiment.
      • Investors also continued to track the yen and JGB yields after the Bank of Japan made adjustments to its yield curve control policy at last week’s meeting.
      • Technology stocks led the decline, with sharp losses from Advantest (-2.7%), Tokyo Electron (-1.1%) source : Reuters

Energy

Oil prices lower after Dollar rally.

• Brent crude oil fell toward $83 per barrel on Wednesday, pressured by an upswing for the dollar and general unease in global commodity markets.
  • The US Treasury is set to boost its debt issuance above market expectations, underscoring the US’s dependency on running deficits and backing Fitch’s decision to cut the US’s credit rating.
  • The result, a flight to the greenback as risk sentiment waned.
  • Concerns around commodity demand were also magnified by deepening contractions in China’s manufacturing sector following another round of weak PMI data for the world’s top oil importer.
    • Crude oil futures fell under pressure despite fresh data showing that US crude oil inventories fell by 17.05 million barrels in the last week of July, the most on record.
    • The development added to supply pressures amid bets that Saudi Arabia may announce another production cut in Friday’s OPEC meeting. Source Gulf news

Metals

Precious metals lost more ground after the Dollar rally.

• Gold held below $1,940 an ounce on Thursday, hovering close to three-week lows and facing pressure from a strong dollar.
  • Traders citing signs that the US economy remains resilient in the face of higher interest rates support the Federal Reserve’s case to keep monetary policy restrictive.
  • Latest data showed that US private payrolls rose more than expected in July, pointing to a strong labour market.
  • Meanwhile, Fitch Ratings cut the US’s long-term credit rating from AAA to AA+ late on Tuesday.
  • The agency citing the expected fiscal deterioration and growing general government debt burden. Source Kitco

Currencies

Dollar higher on the back of  risk-off sentiment and rising US yields

• The dollar firmed up above 102.2 on Thursday.
• The buck hovering near four-week highs as signs that the US economy remains resilient in the face of higher interest rates outweighed a US credit rating downgrade that raised concerns about the fiscal outlook.
• A wave of risk aversion in the financial markets following the rating downgrade also boosted the dollar.
• An ADP report showed that US private payrolls rose more than expected in July, pointing to a strong labour market that supports the Federal Reserve’s case to keep monetary policy restrictive.
• Investors now look ahead to initial jobless claims and durable goods orders on Thursday, as well as the July jobs report on Friday. Source :  Forexnews