The ZAR consolidated near weaker levels ahead of today’s NFP report at 14h30 SA time.
Data This week
- 14H30 US NON FARM PAYROLLS 200K EXPECTED VS 209K PREVIOUS
- 14H30 US UNEMPLOYMENT RATE 3.6% EXPECTED UNCHANGED
The Rand weakness on Thursday, before the local unit consolidated around the R18.70/$ level.
The continued rise in US yields supporting a rampant Dollar, resulting in a negative for Risk assets.
- Equities remain under pressure following a combination of factors i.e. the US downgrade, stronger GDP and a solid jobs picture.
- All of this contributing to higher yields with the US10YT AT 4.18%.
- Of course all of this can change in an instant at 14h30 today.
- The market is priced for +200k new jobs created in the US Non-farm payrolls report.
- A higher than expected jobs report likely to support the Dollar and likewise a number below will see the Dollar retreat.
- NB: given the size of the move, the ZAR weakening from R17.5000/$ to R18.7700/$,
- A weak NFP report could see the ZAR below R18.5000 and heading towards R18.0000/$
- Trade : stay neutral until after NFP
South Africa’s new vaping tax won’t deter young smokers
- They would typically start with disposable vapes, which are subject to the lowest tax burden.
- Throughout the world, governments impose excise taxes on products like alcohol and tobacco to reduce their demand.
- The South African government has implemented a tax on vaping products for the same reason.
- Reducing demand is necessary as there is growing evidence that vaping products are not harmless.
- The new vaping tax has enraged vaping lobby groups and vaping manufacturers.
- The vaping industry argues that e-cigarettes are less harmful than traditional cigarettes.
- It also claims that the tax will spawn an illicit industry, that people will go back to smoking traditional cigarettes.
- Also the tax will not dissuade the youth from starting vaping. Source EWN
CAPE TOWN TAXI STRIKES
- The strike by taxi operators in Cape Town has led to growing concerns around public transport and the safety of commuters.
- Thousands of people were stranded at public transport points on Thursday afternoon.
- A few Golden Arrow buses tried to accommodate thousands of commuters at the Cape Town bus terminus.
- READ: 2 Golden Arrow buses set alight at Nyanga bus terminus
- To compound the frustration of commuters, trains also cancelled services and there was not a single taxi in sight at the station deck taxi rank.
- This meant that the Cape Town train station was also filled with further scores of stranded commuters who had no clue about how they would make it home. Source moneyweb
Equities lower after US downgrade
- US stock futures rose on Friday as traders sifted through the latest corporate earnings reports, while looking ahead to the key monthly jobs report that could influence the interest rate outlook.
- Futures contracts tied to the three major indexes were all up at least 0.1%.
- In extended trading, Amazon jumped more than 9% after beating expectations on the top and bottom lines, while Apple fell 2% on weaker revenues.
- The Dow fell 0.19%, the S&P 500 dropped 0.26% and the Nasdaq Composite lost 0.1%, as rising Treasury yields continued to pressure the market.
- Investors now await Friday’s jobs report for further insights into the strength of the labour market and economy.
- The yield on the US 10-year Treasury note continued to rise to 4.18% in August, a level not seen since the beginning of November.
- Traders digest fresh economic data.
- Initial claims edged only slightly higher as expected, job cuts were the lowest in nearly a year
- and both labour costs and productivity beat forecasts, in a sign the labour market remains robust.
- The payrolls report due Friday will now be keenly watched for further updates on the jobs market.
- The data continues to proven the US’s resilience to higher interest rates, spurring some bets of another rate hike this year.
Market Close Yesterday:
- DOW -66 to 35,215
- SP500 -11 to 4,501
- NASDAQ -13 to 13,959
image: Trading economics
Asian equities lower after Wall Street sell-off.
- In Japan , the Nikkei 225 Index rose 0.1% to close at 32,193, finishing the week lower as a wave of risk-off sentiment spread throughout the market .
- Traders citing a period of following a US credit rating downgrade and a strong run-up in US Treasury yields.
- 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.
- Notable gains were seen from index heavyweights on Friday such as Nippon Yusen (3.1%), Toyota Motor (1.3%). Source Reuters
Oil prices higher as Saudi extends supply cuts.
- US WTI crude futures rose toward $82/bl on Friday and were on track to advance for the sixth consecutive week.
- Prices supported by Saudi Arabia and Russia’s announcement that they would extend voluntary supply cuts through next month.
- Saudi Arabia said on Thursday it would extend its 1 million barrels per day production cut for another month, while Russia said it will also reduce its oil exports by 300,000 bpd in September.
- Those announcements came a day ahead of an OPEC+ meeting, where the group is expected to largely maintain current oil output policy of limiting supply into 2024.
- On the demand side, meanwhile, concerns about a subdued recovery in China and most European countries continued to weigh on sentiment. Source Gulf News
Precious metals losing more due to Dollar rally.
- Gold steadied above $1,930/oz on Friday but was still set to end the week lower.
- Prices pressured by a strong dollar and rising Treasury yields amid a series of solid US economic data this week.
- Investors also braced for a key US monthly jobs report due for release later today that could influence the path for US interest rates.
- Meanwhile, the BOE lifted its policy rate by 25 basis points on Thursday and warned that borrowing costs were likely to stay high for some time.
- Also an ECB official made the case for keeping ECB’s interest rates at their current high levels for longer.
- The metal is on track to lose more than 1% this week, its worst weekly performance since late June. Source: Kitco
Dollar higher on the back of rising US yields
- The dollar index eased below 102.4 on Friday, slipping for the second straight session as investors braced for a key monthly jobs report that could influence the path for US interest rates.
- Investors also assessed data showing US jobless claims remained near five-month lows last week and factory orders rose the most in two-and-a-half years in June.
- Still, the dollar is on track to gain for the third straight week as strong US economic data and rising Treasury yields supported the currency.
- A recent downgrade in US credit rating also raised concerns about the fiscal outlook, driving a flight towards the safe-haven dollar.
- The greenback weakened against major currencies on Friday, with the most pronounced selling activity against the risk-sensitive sterling and Aussie. Source : Kitco