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Morning NOTE

GOOD MORNING

The ZAR strengthened on the back of month end profit taking and also weaker than expected US DATA.

OPENING RATES

• USDZAR 18.2900
• EURZAR 19.3900
• GBPZAR 22.0300

SOUTH AFRICA

Eskom

• An investigation has allegedly revealed the cartels being responsible for some of the malpractice and sabotage at Eskom facilities.
  • The Daily Maverick said it had evidence that at least four criminal cartels had been operating within Eskom for many years.
    • The publication said the cartels were responsible for some of the malpractice and sabotage at Eskom facilities,
      • while equipment was often bought without the actual machinery arriving.
  • The Daily Maverick‘s Kevin Bloom has been investigating Eskom.
    • However, Bloom said that the cartel’s operations were untraceable through forensic audits.
    • “They have insiders in certain power stations, often a senior engineer in a distribution or generation division. NEWS24
       
• ActionSA lawyer Michael Herbst says President Cyril Ramaphosa’s statement that government is not constitutionally obligated to provide South Africans with electricity is not true.
  • Ramaphosa filed an opposing affidavit in the case being brought by the United Democratic Movement and 17 others.
  • This was in response to Ramaphosa’s statement in which he said none of the three spheres of government had the responsibility to supply power to South Africans. EWN
     
• Public Enterprises Minister Pravin Gordhan confirmed that former Eskom CEO Andre de Ruyter spoke to him about corruption at the power utility, but never presented any evidence.
  • In an interview with Newzroom Afrika, Gordhan said: “Yes, he made allusions about certain individuals, but it was precisely that, allusions.
  • And, as far as the law is concerned, or my understanding of the law is concerned,
    • I can’t just arbitrarily point to someone and say that person is involved… either being corrupt or involved in corruption,” he said. News24
       
• South Africa’s unemployment rate eased to 32.7% in the fourth quarter of 2022, the lowest since the first quarter of 2021, from 32.9% in the prior period.
  • The number of unemployed persons rose by 28 k to 7.753 million, the employed increased by 169 thousand to 15.934 million and the labour force went up by 197k to 23.688 million. EWN

GLOBAL MARKETS

Stocks:

• US stock futures edged lower on Wednesday after the major averages closed out a losing month.
  • Investors repositioned for the prospect of a higher peak for US interest rates.
     
• For the month of February, the Dow declined 4.19% and turned negative for the year, while the S&P 500 and Nasdaq dropped 2.61% and 1.11%, respectively.
  • Those losses came on the heels of stronger-than-expected US economic data that suggested the Federal Reserve will have to tighten policy further to tame surging inflation.
• Investors now look ahead to US manufacturing and construction data on Wednesday, as well as corporate earnings from major firms such as Lowe’s, Salesforce and Snowflake.

Bonds:

• US 10 Year Note Bond Yield was 3.94 percent on Wednesday March 1, according to over-the-counter interbank yield quotes for this government bond maturity.
• Yields remain elevated on the back of Fed speakers who continue to push for higher rates to bring inflation down to 2%.
• Recent data activity shows the US economy continues to face headwinds with Housing prices declining for an 8^th straight month.
• In addition Chicago PMI also showed a slowing printing 43.6 in Feb vs 44.3 previous
  • We now turning our attention to ISM manufacturing data as well as Services later in the week.
  • Both likely to be market movers.

Yesterday

• The Dow fell 232 points to 32,656
• The SP500 fell 12 points to 3,970
• The Nasdaq fell 11 points to 11,455

:  image: Trading economics

OVERNIGHT HEADLINES

The US dollar

• The dollar index extended losses to 104.9, down from a seven-week high hit above 105 as investors digest the latest economic data and try to gauge the next monetary policy steps.
  • Hotter-than-expected economic data raised the prospect of interest rates staying higher for longer as the Federal Reserve fights stubborn inflation.
    • Investors have now priced at least three more 25 basis point rate hikes this year and see interest rates peaking at around 5.5% by June.
  • Market participants now look ahead to more US economic reports, such as consumer confidence, the ISM manufacturing survey, and corporate earnings.
    • Meanwhile, durable goods orders fell more than expected in January.  Fx news

 Asian markets

• In Japan, the Nikkei 225 rose 0.26% to close at 27,516, extending gains from the previous session as upbeat Chinese economic data bolstered the outlook for the global economy and lifted market sentiment.
  • Still, investors remained cautious due to a lack of domestic catalysts, while taking cues from a negative lead on Wall Street overnight as markets fretted about the prospect of a higher peak for US interest rates.
  • Notable gains were seen from index heavyweights such as Nippon Steel (1.9%).
     
• In Australia, the economy expanded 0.5% qoq in Q4 of 2022, less than market forecasts of 0.8%, and after an upwardly revised 0.7% rise in Q3.
  • This was the fifth straight quarter of growth in the economy but the softest pace in the sequence.
    • Amid intense cost pressures and rising interest rates.
  • For the whole year, the economy grew by 2.7%, much slower than 2021’s figure of 5.9%. source: Australian Bureau of Statistics
     
• In China, the Shanghai Composite rose 0.4% to around 3,292, extending gains from the previous session as stronger-than-expected economic data supported market optimism over China’s recovery.
  •  Official and private survey data showed that China’s manufacturing sector expanded more than expected in February as Asia’s largest economy dismantled strict Covid curbs.
  • The country’s services sector also posted solid growth.
  •  Technology stocks extended their recent outperformance, China Telecom (5.1%) and China United Network (10%). Reuters

Crude oil

• Brent crude oil gained to reach  $84/bl on Wednesday.
• Prices  rising for the second straight session as investors digested robust manufacturing and services activity data in China, boosting the demand outlook in the world’s largest crude importer.
  • Still, the international oil benchmark declined for the fourth straight month in February, losing more than 2% on fears that further monetary tightening from the Federal Reserve could tip the US economy into recession.
  • Rising US crude inventories and global oil supply also weighed on prices, with OPEC likely pumping more oil in February compared to January.
• Still, on the supply side, Russia recently revealed its plans to cut oil exports from its western ports by up to 25% in March, exceeding its announced output curbs of 500,000 barrels per day. Gulf Energy news

Gold

• Gold strengthened above $1,830/OZ  on Wednesday, rising for the third straight session as the dollar eased from recent highs.
  • Although expectations that the US Federal Reserve will continue raising interest rates to bring down inflation kept a lid on prices.
• Bullion  lost more than 5% in February as stronger-than-expected US economic data fanned concerns about hawkish central bank policies.
  • In a speech to an economics class at Harvard University, Fed Governor Philip Jefferson defended the central bank’s 2% inflation target,
    • …warning that changing it could destabilize inflation expectations.
  • Money markets have now priced at least three more 25 basis point rate hikes this year and see interest rates peaking at around 5.5% by June. Kitco metals