*|MC:SUBJECT|*







View this email in your browser

Morning NOTE

10 November 2022

GOOD MORNING

The ZAR remained range bound ahead of today’s KEY US CPI data.

SUMMARY

  • The Rand remained inside the Week’s range with 17.6400  and 17.8800 key levels.
    • Traders remain solely focussed on today’s US CPI WITH 8% EXPECTED, below the previous print of 8.2% .
       
  • On the monetary side, the FED delivered a widely expected 75 bps hike last week as it  seeks to bring down inflation to its 2% target.
    • While recent data showed that the job market remains extremely tight, , all eyes turn to October inflation data for more clues on future interest rate hikes.
    • The US 10YR AT 4.10% and the DXY at 110.00 .
    • Both likely to affected after the DATA.
       
  • Local SA manufacturing and mining data, unlikely to be market movers.
     
  • Asian markets also trading lower, as traders preferred to exercise caution and not place any big bets ahead of the data.
     
  • NB: Global inflationary pressures continues after  Denmark’s  inflation hit 10.1% vs 10.00% excepted , the highest since 1982 .

Significant Market Data:

Thursday

  • 11h30: SA mining, Gold and Manufacturing data
    • Mining expected at -4.3% YOY vs -5.9% previous
    • Gold expected at -15.7% YOY vs -17.4% previous
       
  • NB:  contraction continues in SA’s industrial sector, as the industry suffers at the hands of ESKOM and loadshedding and Labour demands.
     
  • 15h30 :  US INFLATION – CPI EXPECTED 8% VS 8.2% PREVIOUS
  • 15H30 : US CORE INFLATION – 6.5% EXPECTED VS 6.6% PREVIOUS

Today:

  • The ZAR  continues to trade inside Monday’s range as markets remain focussed on the US CPI report later today.
    • The local unit stuck below 17.8800 ( key level) – a break sees 18.0500
    • And above 17.6400(support), a break targets 17.5000 .
    • Pre-data : Market makers most likely to trigger stop losses on either sides of the ranges ahead of the data release.
       
    • Given the importance of today’s number it is likely that one of the levels will be in play.
       
    • Recap : higher than expected US CPI will result in a stronger Dollar and re-affirms the FED’s commitment,
      • Lower than expected will set off a large amount of RISK ON BUYING ,  resulting in stronger ZAR .
    • SA manufacturing and mining data not likely to be market movers given the importance of the US data.
       
  • Trading range 17.6400-17.8800, NB : with a break – post data likely to determine the new trend for the Rand.

Expected Ranges

  • USDZAR :  Expect a range 17.6400-17.8800
    • Importers 17.7200-17.6400
    • Exporters 17.8000-17.8800
       
  • EURZAR :  Expect a range of 17.6700-17.9100
    • Importers 17.7500-17.6700
    • Exporters 17.8300-17.9100 
       
  • GBPZAR :  Expect a range of 19.9900-20.4400
    • Importers 20.1400-19.9900
    • Exporters 20.2900-20.4400

OPENING RATES

  • USDZAR 17.7500
  • EURZAR 17.8200
  • GBPZAR 20.2600

SOUTH AFRICA

ESKOM

  • Eskom says stage two power cuts will start from 9AM on Tuesday morning because of failing generating units at coal power plants.
    • Spokesperson, Sikonathi Mantshantsha, said that stage two would continue until further notice. News24
       
  • SIU OBTAINS ORDER TO FREEZE ASSETS OF FORMER ESKOM MANAGER & HER HUSBAND
    • It’s understood that she siphoned almost R25 million from an Eskom supplier, which was appointed to transport raw material and water from Kendal power station to Kusile power station.
    • The Special Investigating Unit (SIU) says it has obtained a preservation order to freeze assets of a former Eskom manager, her husband and their two children. EWN
       
  • The World Bank Group has approved a loan request for US$497 million for a project to decommission and repurpose the Komati coal-fired power plant.
    • The plan is to instead repurpose the plant for the use renewable energy and batteries.
      • The lifespan of the plant in Mpumalanga came to an end on Monday after being in operation since 1961.
      • The loan has now been approved by the group’s board, a key step towards converting the plant into a renewable generation site, also adding to the country’s ailing power grid. IOL
         
  • Public service workers say the cost of living is unbearable as they prepare for a massive strike over wages.
    • The sector is disgruntled after government refused to budge from its offer of a 3% wage increase.
      • Workers want increases in line with inflation.
      • Public sector workers outside the Johannesburg prison have hit out at government’s response to their pleas for higher wages.
      • The picket outside the prison gates is a part of the build-up to a massive strike across the country on Thursday.  EWN
         

GLOBAL MARKETS

  • US stock futures were little changed on Thursday as investors look ahead to the October inflation report, while closely monitoring midterm election results.
    • Futures contracts tied to the three major indexes were all trading near breakeven.
       
  • Yesterday, the Dow fell 1.95%, the S&P 500 dropped 2.08% and the Nasdaq Composite tumbled 2.48%, with US stocks snapping a three-day advance.
    • Those moves came as the midterm elections proved more competitive than anticipated, as the market had hoped for a landslide win for Republicans, creating a gridlock in Washington.
    • Investors now turn their focus to the US CPI report for hints on how further the Federal Reserve may tighten financial conditions to cool an overheating economy.

Bonds:

  • The US 10-year Treasury yield, trade below 4.1%, as investors awaited the outcome of congressional midterm elections and inflation data due to be released later in the week.
    • A split government, with Republicans winning the House of Representatives and possibly the Senate, could result in political gridlock that hampers significant reforms while boosting risk appetite.
       
  • On the monetary side, the Federal Reserve delivered a widely expected 75 bps hike last week while flagging a longer monetary tightening path as the central bank seeks to bring down inflation to its 2% target.
    • While recent data showed that the job market remains extremely tight, now, all eyes turn to October inflation data, due on Thursday, for more clues on future interest rate hikes.

YESTERDAY

  • The Dow fell 646 to 32,513
  • The SP500 fell 79 to 3,748
  • The Nasdaq fell 263 to 10,616

OVERNIGHT HEADLINES
 

  • Asian markets lower following a sharp decline on Wall street.
    • In Japan, the Nikkei 225 dropped 0.97% to close at 27,446, sliding for the second straight session and tracking losses on Wall Street overnight.
      • The hotly contested US midterm elections.
      • Investors also braced for US inflation data due on Thursday that could influence the Federal Reserve’s next policy move. Nearly all sectors declined.
  • In Australia, the ASX 200 fell 0.5% to 6,964 tracking losses on Wall Street overnight, with technology and resource-related stocks leading the declines.
    • Xero led the tech sector lower, tumbling 10.9% after reporting a huge first half loss and announcing the replacement of its CEO.
    • Heavyweight miners, gold stocks and clean energy-related names also slumped such as BHP Group (-1.5%).
    • Elsewhere, energy firms declined on weaker oil and coal prices, with sector leaders Woodside Energy and Whitehaven Coal losing 2.3% and 3.3%, respectively.
       
  • The US dollar index steadied above 110, with traders looking ahead to a key US inflation report.
    • Traders also constantly tracking midterm election results.
    • The midterm elections proved more competitive than anticipated, as the market had hoped for a landslide win for Republicans that would create a gridlock in Washington.
    • Investors now turn their focus to the October CPI report due later in the day that could influence the Federal Reserve’s next policy move.
    • Markets are currently priced for a more moderate half percentage point Fed rate hike next month,
      • but a hotter-than-anticipated inflation report could fuel bets for another supersized 75 basis point increase. FX news
  • Crude oil, Brent crude trading  below $93/bl on Thursday after losing 6% in the past three sessions.
    • Prices pressured by a larger-than-expected build in US crude inventories and China’s ongoing battle against resurgent Covid outbreaks.
    • Official data showed that US crude stockpiles rose by 3.93 million barrels last week, higher than forecasts for a 1.36 million barrel build.
    • Uncertainty around China’s outlook added to fears that an aggressive tightening campaign by central banks in developed economies will drag the world into a recession.
  • In America
    • WTI crude futures held below $86 /bl on Thursday after losing more than 7% in the past three sessions. Gulf Energy news
       
  • Gold prices solid above  $1,710 /oz, hovering near a one-month high hit in the previous session.
    • Traders waiting for the US inflation report that could signal the size of the Federal Reserve’s interest rate hike in December.
    • Analysts observed that the market seemed positioned for softer data, and warned that recent months have produced upside surprises.
      • Markets are currently priced for a more moderate half percentage point Fed rate hike next month.
        • However, a hotter-than-anticipated inflation report could fuel bets for another supersized 75 basis point increase.
    • While gold is widely considered as a hedge against inflation and economic uncertainties, higher interest rates raise the opportunity cost of holding non-yielding bullion, denting its appeal. Kitco metals

Crypto winter

  • Bitcoin US Dollar traded at 16726 this Thursday November 10th.
  • The FT reporting that the Crypto winter risks turning into ice age
    • ‘Apathy’ kicks in as asset class fails to pick up after this year’s market crash.
    • The ongoing crypto winter is “only going to get worse” as the industry recalibrates to a higher interest rate world,
    • This was according to the co-founder of blockchain platform Tezos.
    • Higher interest rates were being blamed for the sharp drop, but analysts conclude, that
    •  Even if the Fed pauses rate hikes next year, only the “small minority” of crypto applications that are truly useful and can organically grow users will thrive.  Financial Times

Copyright ©
2022 RussellStone Treasury 
All rights reserved.

Our mailing address is:
trade@russellstone.co.za

Want to change how you receive these emails?
You can update your preferences or unsubscribe from this list.