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Morning NOTE

GOOD MORNING

The ZAR recovered sharply on Friday, on the back of a rebound in Risk assets.

OPENING RATES

• USDZAR : 17.6300
• EURZAR : 19.4400
• GBPZAR : 22.6600

SOUTH AFRICA

Eskom

• Eskom announced new loadshedding schedules as South Africans battle another cold front.
• The SOE stating loadshedding will be implemented at Stages 2 and 4 during the week.
• Breakdowns have reduced to 15 798MW of generating capacity while the generating capacity out of service for planned maintenance is 3 099MW.
• Over the past 24 hours, a few generating units were returned to service , including Majuba and Medupi power stations. Source : Eskom media

Cape Town

• Mother city records big increase in tourist numbers.
• SA’s favourite tourist destination recovers from the Covid-19 disaster.
• Tourism has been recovering strongly from the dark days of Covid-19, but the numbers are still below those of 2019 – except for Cape Town.
• Figures show that tourism in the Western Cape, especially Cape Town, has recovered better than in the rest of SA and that the number of visitors has increased to above those of 2020.
• Tourist accommodation shows that income generated by businesses offering accommodation increased to nearly R11 billion in the first five months of 2023. This is 42% higher than the R7.7 billion spend in the same period in 2022.
• Then there is the expenditure on eating, drinking, sightseeing, car rental and leisure activities, generously dished out from wallets full of valuable dollars, euros and pounds. Stats SA

GLOBAL MARKETS

Stocks

• Stocks higher after month end rally ensures positive month.

  • US stock futures were little changed on Tuesday as investors cautiously awaited a fresh batch of corporate earnings reports.
  • Futures contracts tied to the three major indexes were all trading near breakeven.
  • Yesterday, the Dow rose 0.28%, the S&P 500 gained 0.15% and the Nasdaq Composite climbed 0.21%.
  • The three benchmarks booking solid gains for July.
  • Solid reported earnings, with 80% beating estimates on the SP500 fuelled the market rally further.
• Traders hoping that the US economy will be able to avoid a recession, while easing inflation lowered the odds of further Federal Reserve monetary tightening.

Bonds

• Yields lower after RBA pauses again.

  • The benchmark, US 10 Year Note Bond Yield was 3.97 % on Tuesday August 1, according to OTC interbank yield quotes for this government bond maturity. Traders awaiting key data that includes PMI’s and the US NFP report on Friday.
  • Across the pond, the 10-year UK gilt yield continued to consolidate gains above 4.3%, reaching its highest level since July 17.
  • Investors prepared for the BOE’s August policy meeting. Markets are priced for another +25 bps.
  • It will send borrowing costs to their highest level since the 2008 financial crisis, in response to persistent high inflation.

Market Close:

• DOW +100 TO 35,559
• SP500 +6 TO 4,588
• NASDAQ +29 TO 14,366

OVERNIGHT HEADLINES

  image: Trading economics
 

Asian markets

• Stocks lower after US data,  raised the possibility of more rate hikes.

• In Japan, the Nikkei 225 Index rose 0.5% to around 33,330, extending gains from the previous session.
  • Traders citing firmer commodity prices helping resource-related stocks.
  • Investors also digested data showing Japan’s unemployment rate fell slightly to 2.5% in June from 2.6% in May.
  • Traders also tracking the 10-year JGB yield which surged to nine-year highs as the BOJ allowed it to rise above the 0.5% upper limit.
  • Gains among commodity-linked stocks were led by Nippon Steel (1.5%).Source Reuters
• In Australia, the RBA surprised markets once again by leaving rates unchanged at 4.1%.  markets were priced for a 25 bps hike.
  • The news sent the Aussie Dollar sharply lower vs the US dollar losing nearly 1% at 0.6650. Source Trading economics

Energy

Oil prices higher on supply concerns.  

• US WTI crude futures held above $81 per barrel on Tuesday.
  • Prices, hovering close to its highest levels in three months as the prospect of tighter global supply continued to lift oil prices.
  • The US oil benchmark also rallied 15.8% in July, its best monthly performance since January 2022.
  • Markets geared up for an OPEC+ meeting this week, where de facto leader Saudi Arabia is expected to extend its voluntary output cut for another month.
  • On the demand side, latest data showed that US fuel demand rose to 20.78 million bpd in May.
  • It was the highest since August 2019.Source: Gulf News

Metals

Precious metals finding support.

• Gold traded above $1,950  to $1962/oz after closing out July with solid gains of 2%.
• The yellow metal remains well supported by growing expectations that central banks may be nearing the end of the tightening cycle.
• In the US, data on Friday showed that annual core PCE prices rose 4.1% in June, the lowest since September 2021 and less than market expectations of 4.2%. Last week, the Fed implemented a widely expected 25 basis point rate hike in what analysts suggested could be the last rate increase in the current monetary tightening cycle.
• Earlier this morning the RBA left rates unchanged at 4.1% vs a market expected +25bps hike. Source Kitco

Currencies

Dollar higher on the back of strong US Data.

• The US dollar index spiked above 102 on Tuesday.
• The Buck hovering near its strongest levels in three weeks as traders awaited more data to guide the economic and monetary policy outlook.
• On Monday, a Federal Reserve survey showed US banks reported tighter credit standards and weaker loan demand from both businesses and consumers in the second quarter.
• Chicago Fed President, Goolsbee also said the US central bank is “walking the line pretty well” on bringing down inflation without causing a recession.
• Investors now look ahead to US manufacturing and services PMI data on Tuesday, as well as a key monthly jobs report later in the week.
• The dollar strengthened notably against the Japanese yen as investors continued to assess the Bank of Japan’s yield curve control policy adjustment.
• It also gained sharply versus the Australian dollar after the RBA policy decision of “no hike” after markets priced in 25bps. Source Fxnews