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Morning NOTE

GOOD MORNING

The ZAR weakened another 1.7%, reaching 18.9600 as investors continue to sell the local unit.

OPENING RATES

• USDZAR 18.9200
• EURZAR 20.7200
• GBPZAR 23.8900

SOUTH AFRICA

E-tolls 2.0

• The South African National Roads Agency (Sanral) is considering developing further toll roads to fund an identified R15 billion per annum shortfall to fulfil its mandate over the next decade.
  • Sanral revealed the R150 billion funding shortfall for the period when it tabled its annual performance plan in parliament last month.
  • Sanral said these improvements, at an estimated value of R150 billion, were identified as being “viable to implement through the toll financing mechanism”.
  • He said this would enable Sanral to accelerate implementation within a four-year period and unlock major economic benefits,
    • such as job creation, while reducing road user costs associated with the improvements much sooner. Moneyweb
       
• Johannesburg customers who refuse to pay for electricity will no longer receive support from City Power.
  • According to the electrical entity’s spokesperson Isaac Mangena, City Power is owed around R10 billion in unpaid electricity bills.
  • Mangena said the entity has embarked on an auditing process and will assess customers’ meters and vending history.
  • Before dispatching teams to a power outage, City Power will ensure that at least 70% of the customers in an area with a medium voltage outage are paying customers. 
     

SA Weather warning

• Cold and wet weather conditions are expected from Thursday into the weekend in the Western Cape, Eastern Cape and Northern Cape.  
• The SA Weather Service is warning residents to take precautions. 
• A Yellow Level 2 warning has been issued to those who in Saldanha Bay and Cape Agulhas in the Western Cape. EWN

GLOBAL MARKETS

Stocks

• In regular trading on Wednesday, the Dow shed 0.09%, while the S&P 500 and Nasdaq Composite gained 0.45% and 1.04%, respectively.
  • US stock futures held steady on Thursday as investors weighed the fresh consumer price index report, while looking ahead to producer inflation figures.
  • Futures contracts tied to the three major index drifted flat to positive.
  • In extended trading, Disney, Groupon and Sonos tumbled on disappointing quarterly updates, while Beyond Meat, Robinhood and Unity Software jumped on better-than-expected results.
     
• Seven out of the 11 S&P sectors finished higher, with communication services and technology leading the advance, while energy and financials lagged behind the market.

Bonds

• US 10 Year Bond Yield was 3.42 percent on Thursday May 11, according to over-the-counter interbank yield quotes for this government bond maturity.
• The latest CPI report showed that headline inflation in the US unexpectedly slowed last month, supporting expectations that the Federal Reserve could pause its interest rate hikes next month.

Yesterday

• DOW -30 at 33,531
• SP500 added 18 to 4,137
• NASDAQ gained 127 to 12,306

  image: Trading economics

OVERNIGHT HEADLINES

The US dollar

• The US dollar rallied in early trading to reach 101.89 on the back of early session European profit taking.
  • The Buck under pressure index held below 101.5 on Thursday after losing ground in the previous session as the latest CPI report showed that headline inflation in the US unexpectedly slowed last month.
  • Trader actions supporting bets that the Federal Reserve will pause its interest rate hikes in June.
    • The annual inflation rate stood at 4.9% in April, defying expectations for no change and falling below 5% for the first time in two years.
    • Money markets are currently pricing a 95% chance of a pause next month, while 5% expect another quarter-point rate hike.
    • The dollar also came under pressure from ongoing negotiations over the US debt ceiling,
      • after a meeting between President Joe Biden and congressional leaders late on Tuesday yielded little progress. FX NEWS

Asian markets

• In Japan, the Nikkei 225 inched up 0.02% to close at 29,127, with Japanese markets struggling for direction as mixed domestic earnings results weighed on sentiment.
  • Investors also continued to assess the economic and monetary policy outlook globally, as latest data showed that consumer inflation in the US unexpectedly slowed last month.
  • The data supporting expectations that the Federal Reserve could pause its interest rate hikes soon.
    • Japanese shares traded mixed on Thursday, with gains from index heavyweights such as Nippon Steel (1.6%), Tokyo Electron (1.6%) and Mitsubishi UFJ (0.8%).
       
• In China, the Shanghai Composite fell 0.29% to close at 3,310, as investors reacted to data showing the consumer price index in China rose 0.1% year-on-year in April, the slowest pace since early 2021.
  • Producer prices also declined 3.6% in April, the sharpest fall in nearly three years.
  • The data suggested that more fiscal and monetary stimulus may be needed to boost the country’s economic recovery.  Reuters

Crude oil

• WTI crude futures rose toward $73 /bl on Thursday.
• Prices recouping some losses from the previous session as EIA data showed that US gasoline inventories declined by 3.2 million barrels last week.
  • The drop exceeding forecasts for a 1.2 million barrel draw and suggesting fuel demand in the world’s top oil consumer remained robust.
    • Meanwhile, the same report indicated that US crude stockpiles increased by 3 million barrels last week, defying expectations of a 900,000 barrel decline.
  • Elsewhere, trade data from China showed that crude oil imports fell 16% annually to 10.6 million barrels per day in April, adding to fears of an economic slowdown in Asia’s largest economy.
    • Analysts also remained sceptical that Russia’s planned output cuts will materialize.

Gold

• Gold prices steadied above $2,030/oz on Thursday, remaining in positive territory so far this week as the latest CPI report showed that headline inflation in the US unexpectedly slowed last month.
• CPI supporting a FED pause in interest rate hikes in June.
• The metals also found support from uncertainties surrounding the US debt ceiling,
  • This as Joe Biden piled pressure on Republican lawmakers on Wednesday to raise the $31.4 trillion debt limit or risk throwing the world’s largest economy into recession. Kitco metals