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Morning NOTE

GOOD MORNING

The ZAR lost ground due to stop hunting over the easter weekend as liquidity conditions evaporated.

OPENING RATES

• USDZAR : 18.4400
• EURZAR : 20.0700
• GBPZAR : 22.8800

SOUTH AFRICA

• The City of Tshwane said the collapse of several electricity powerlines in the capital city was caused by vandalism and theft.
  • At least seven electricity pylons fell onto the N4 highway on Monday, cutting off power to thousands of households,
    • and blocking off traffic between the Solomon Mahlangu and Simon Vermooten offramps.
  • While officials were able to clear the high-voltage powerlines from the road, residents remained in the dark on when electricity would be restored.
  • New City mayor Cilliers Brink blamed the extensive damage on criminals who were stripping off metal from the base of the pylons, compromising the infrastructure. News 24

JOBURG’S WASTE WOES: CITY FAST RUNNING OUT OF LANDFILL SPACE

• The City of Johannesburg collects tonnes of solid waste every day and is fast running out of landfill space.
  • The rapid population growth in what is Gauteng’s economic hub is a major contributing factor, said the municipality.
    • MMC for Environment and Infrastructure Services, said the city sees almost 10,000 new people every month.
  • The influx leaving the municipality under immense pressure to keep up with the amount of solid waste generated.
    • Eyewitness News takes a look into this problem and how it can be resolved.  EWN

Stage 5

• Eskom said that stage 5 load shedding was on the cards later on Tuesday.
  • The struggling utility said that when stage 3 ends at 4PM on Tuesday afternoon, stage 5 would kick in and end at 5AM on Wednesday morning.
  • The power utility attributed the alternating stages of load shedding to capacity constraints as a result of some power stations not returning to service. News24

GLOBAL MARKETS

STOCKS

US stock futures held steady on Tuesday after the major averages ended mixed during Monday’s regular session.

• Investors look ahead to key inflation data later this week for clues on the Federal Reserve’s rate-hiking campaign.
• Futures contracts tied to the three major indexes drifted flat to slightly positive.
   
• In regular trading on Monday, the Dow and S&P 500 gained 0.3% and 0.1%, respectively, while the Nasdaq Composite shed 0.03%.
   
• Friday’s jobs data from the US Labour Department revealed a still-tight labour market, supporting bets for another Fed rate hike in May but easing some concerns that the world’s largest economy is heading toward recession.
   
• Focus now turns to the US CPI report due on Wednesday and the first batch of companies reporting first-quarter financial results for further clues about the economy’s health and the likely future path for monetary policy

BONDS

• The yield on the US 10-year note reversed early losses to trade higher above 3.41% to kick off the second week of April.
• Investors return from the Easter weekend and continue to assess the economic and the monetary policy outlook.
• Most investors now see the Fed delivering another 25bps increase in the fed funds rate in May, after the payrolls report continued to point to a tight labour market,
  • with the economy adding 236K jobs and the unemployment rate dropping to near record lows to 3.5%.
  • Traders now await consumer and producer inflation releases and FOMC minutes for further clues on the Fed’s next move.
  • On Friday, the ten-year yield jumped as much as 11bps after the NFP release while the two-year rose as much as 15bps to 3.97%. Bloomberg 

Yesterday

• The Dow rallied 101 to 33,586
• The SP50 added 4 points to 4,109
• The Nasdaq fell 3 to 12,084

  image: Trading economics

OVERNIGHT HEADLINES

The US Dollar

• The US dollar strengthened toward the 103 mark as investors bolstered bets that the Federal Reserve would hike rates in May following Friday’s payrolls data.
  • The US Labour Department’s closely watched report showed the U.S. nonfarm payrolls increased by 236,000 jobs in March, coming close to expectations of 239,000.
    • The unemployment rate also fell to 3.5% compared with the forecasts of 3.6%.
  • Markets are now pricing in an over 70% chance that the Fed would raise rates by 25 basis points next month.
    • Investors also await the US CPI report later this week for further clues on the tightening path.
  • The dollar’s strength was seen across the board, with some of the most pronounced buying activity against the Japanese yen.
    • This  after Japan’s new central bank governor, Kazuo Ueda, hinted at an accommodative monetary stance. FX NEWS

Asian markets

• In Japan, the Nikkei 225 gained 1.05% to close at 27,923, with both benchmarks rising for the third straight session.
  • New Bank of Japan governor Kazuo Ueda said in his inaugural news conference that it was appropriate to maintain the bank’s ultra-loose monetary policy.
  • He said, this is appropriate as inflation has yet to hit 2% sustainably, aiding market sentiment.
  • Technology stocks led the charge, with strong gains from Tokyo Electron (3.7%).
• In Australia, ASX 200 Index jumped 1.26% to close at 7,310 in post-holiday trade on Tuesday, hitting its highest levels in a month.
  • Investors also digested data showing Australian consumer sentiment rose to a ten-month high in April, while business confidence showed improvement.
  • Heavyweight miners led the charge, with strong gains from BHP Group (2.1%), Fortescue Metals (2.9%), Rio Tinto (1.9%).
  • Financial and technology firms posted strong gains as well, including Macquarie Group (1.1%), Westpac Banking (1.8%) and Computershare (1.7%).  Reuters

Crude oil

• WTI crude futures rose above $80 /bl on Tuesday as the prospect of tighter supply from OPEC+ overshadowed concerns about further interest rate hikes that could hurt energy demand.
  • The US oil benchmark jumped nearly 7% last week after OPEC+ unexpectedly announced that it will reduce output by 1.16 million barrels per day from May until the end of 2023.
    • After the announcement, Saudi Arabia raised its May crude prices to term customers in Asia and the US.
      • as well as the monthly reports from OPEC and the IEA that will provide updated forecasts for oil demand and supply. Energy News

Gold

• Gold prices traded above  $2,013/oz after falling over 1% in the previous session.
  • The US dollar eased ahead of key US inflation data.
  • Traders now see the Fed as 71% likely to raise rates by another quarter point in May after data released Friday showed US employers continued to hire at a strong pace in March.
    • They currently expect the Fed to start cutting rates from around September.
  • Meantime, the IMF said Monday in a report that rates in the US and other industrial countries will revert toward ultra-low levels while those in emerging countries are more mixed.
    • Financial markets have been pessimistic about the US economy since some small US banks collapsed in March.