The ZAR traded in a narrow but weaker range after the release of the US jobs report on Friday.
- The Rand remained in a weaker trading range, following the stronger than expected US jobs report, that indicated scope for more FED hikes.
- The local unit fluctuating between 18.2000-18.0400 .
- The US holiday ( Columbus day), adding to a low liquidity environment, with small ranges, but likely to change today.
- Market currently remain in a RISK OFF environment after global yields spiked overnight.
- The US10YT once again touching 4% before settling at 3.98%, but more importantly the UK 10YT hitting 4.47%,
- After the UK’s BOE continued with its policy of QE in a firelit inflationary environment.
- Markets voting with the SP500 also crashing below the 3600 level.
- All of this points to a session of risk aversion as markets, position nervously ahead of this week’s CPI reports.
- In addition, traders keeping a close eye on the WAR in Ukraine, as oil prices once again flirting with the $100/bl mark, that could add to more inflation woes.
- This morning , the BOE once again intervened in bond markets again, AND warns of ‘material risk’ to UK financial stability.
- The BOE said dysfunction in the index-linked gilt market and “the prospect of self-reinforcing ‘fire sale’ dynamics pose a material risk to U.K. financial stability.”
Significant Market Data
- 8H00: UK UNEMPLOYMENT AUG 3.6% VS 3.6% PREVIOUS
- Earlier this morning UK unemployment fell to 3.5% , the lowest since 1974.
- Indicating a strong labour market and likely more inflationary pressures.
- 13h00 : SA MANUFACTURING YOY 2% EXPECTED VS 3.7% PREVIOUS
- 14H30 : US PPI YOY 8.3% EXPECTED VS 8.7% PREVIOUS
- 14H30 : US CORE PPI YOY 7.3% EXPECTED VS 7.3% PREVIOUS
- 15H30: ECB PRESIDENT LAGARDE SPEAKS
- 20H00 : US FOMC MINUTES FROM SEPTEMBER MEETING ***
- 11h30 : SA GOLD PRODUCTION -18% YOY EXPECTED VS -19.7% PREVIOUS
- 11h30 : SA MINING PRODUCTION -8.7% YOY EXPECTED VS -8.4% PREVIOUS
- 14H30 : US CPI YOY 8.1% EXPECTED VS 8.3% PREVIOUS ***
- 14H30 : US CORE PPI YOY 6.5% EXPECTED VS 6.3% PREVIOUS
*** = HIGH RISK
- 14h30 : US RETAIL SALES 8% YOY EXPECTED VS 9.1% PREVIOUS
- The ZAR remains under pressure after another sell-off in risk assets.
- The rise in US yields also supporting the Dollar and once again keeping the local unit firmly above R18/$ .
- Like yesterday we expect some early session profit taking and a stronger ZAR with support at 18.0500 and a dip below the figure ,
- Presenting good importer buying opportunities.
- As US yields continue to rise it remains supportive of the FED and its rate path.
- Resulting a bid bias for the Dollar.
- Once again, ahead of a busy data week, we encourage clients to exact prudent risk management and hedge at least 50% of their exposures.
- The data will be closely watched and US CPI will be the key driver this week.
- It will affect yields and so determine the next path of the ZAR
- For today though, the trade remains
- BUY USDZAR ON DIPS .
- USDZAR : Expect a range 17.9300-18.3000
- Importers 18.0600-17.9300
- Exporters 18.1800-18.3000
- EURZAR : Expect a range of 17.4300-17.6900
- Importers 17.5300-17.4300
- Exporters 17.5900-17.6900
- GBPZAR : Expect a range of 19.8400-20.1400
- Importers 19.9400-19.8400
- Exporters 20.0400-20.1400
- USDZAR 18.1500
- EURZAR 17.5600
- GBPZAR 19.9800
- The Transnet strike will have serious ramifications for the country, this according to leading analysts.
- Earlier Unions and Transnet met at the CCMA but there’s been no breakthrough in the wage talks.
- Transnet has been offering hikes of between 3% and 4%, while unions want a more inflation-related increase.
- The City of Cape Town’s mayoral committee member for economic growth, James Vos, said that Transnet had already lost an estimated R50 billion due to poor performance this year. EWN
- A fallout of the strike directly affecting the SA agricultural sector with the Berries ZA industry one of the largest affected.
- A spokesman for the South African berry industry has called for an urgent intervention to end the ongoing strike at state-owned rail freight entity, Transnet.
- The industry says the wage dispute must be resolved as 30 000 jobs and R3 billion in revenue hang in the balance. EWN
- Eskom stage 2
- Global stocks remain under pressure.
- Futures for the major averages declined for four straight sessions, as fears about further monetary tightening and a potential recession gripped markets.
- Futures contracts tied to the 3 major indexes were all trading near breakeven.
- In regular trading on Monday, the Dow and S&P 500 fell 0.32% and 0.75%, respectively, posting their fourth straight day of losses.
- The Nasdaq Composite also dropped 1.04% to close at its lowest level in over two years.
- JPMorgan CEO Jamie Dimon warned of a US and global recession by the middle of 2023.
- Meanwhile, investors digested fresh comments from Fed officials, with Vice Chair Lael Brainard advocating for caution as the effect of previous rate increases kick in.
- Investors now look ahead to a raft of US economic data, company earnings and more appearances from Fed officials this week. Source: CNBC
- The US 10 Year Note Bond Yield was 3.99 percent on Tuesday October 11, according to over-the-counter interbank yield quotes for this government bond maturity.
- The 10Y yield spiking after the strong NFP report as well as risk aversion ahead of this week’s US PPI / FOMC Minutes & US CPI reports.
- Across the pond,
- The UK 10Y Bond Yield was 4.46 percent on Tuesday October 11, according to over-the-counter interbank yield quotes for this government bond maturity.
- Following a strong US jobs report , this morning the jobless rate in the UK fell to 3.5% in the three months to August of 2022.
- It was a new low since 1974, and below 3.6% in the previous period. Figures were also lower than market forecasts of 3.6%.
- Indicating more price pressures and yields likely to continue higher. Source: Bloomberg
- The Dow fell 93 pts to 29,202
- The SP500 fell 27 to 3,612
- The Nasdaq declined 110 to 10,542
- Asian markets all lower following another Risk off session on Wall Street.
- In Japan, the Nikkei 225 declined 2.64% to close at 26,401, tracking global markets lower, as investors fretted about tightening financial conditions.
- In addition, increased geopolitical tensions and rising risks of a recession worldwide.
- Technology stocks led the market lower, with traders bracing for US inflation data, FOMC minutes and more appearances from several Fed officials this week that could guide the rates outlook.
- Meanwhile, travel stocks advanced as Japan reinstated visa-free travel to dozens of countries on Tuesday in an effort to boost tourism.
- In Australia, the ASX 200 fell 0.34% to close at 6,645 on Tuesday, sliding for the third straight session, with energy and technology stocks leading the declines.
- Rising global bond yields also pressured equities, as well as concerns over tightening financial conditions, heightened geopolitical tensions and rising risks of a global recession.
- Energy stocks slumped as oil prices retreated from recent highs, with sector leaders Woodside Energy and Santos Ltd losing 2.4% 1.3%, respectively.
- Technology stocks also extended losses on rate hike concerns, also financial, consumer and gold stocks declined as well, while clean energy-related names outperformed the markets. Reuters
- US Dollar
- The US dollar climbed toward 113.5 on Tuesday, rising for the fifth straight session.
- The Greenback was lifted by expectations of further tightening by the Fed and safe-haven demand stemming from global economic and geopolitical risks.
- A stronger-than-expected US jobs report on Friday cemented the view that the Fed will continue to aggressively raise interest rates.
- Traders are looking ahead to US inflation data on Thursday for confirmation.
- Investors also await the FOMC minutes on Wednesday and more appearances from Fed officials this week.
- Heightened geopolitical tensions and global recession fears also spurred safe-haven demand for the dollar, with the IMF and World Bank warning about rising risks of a slowdown.
- The dollar extended its gains against the euro and the sterling, while hitting fresh 2-½-year lows against the Aussie and Kiwi.
- The dollar also hovered 24-year HIGHS versus the yen, prompting speculations of more intervention from Japanese authorities. FX news
- Brent crude oil traded near $96/bl on Tuesday after falling nearly 2% in the previous session.
- The strong US dollar and a weakening demand outlook countered fears about tighter supplies.
- Prices however remain elevated due to supply concerns after the OPEC+ cuts as well as an escalation in the Ukraine/Russia WAR.
- On the demand side slowing the rise in prices were, worries of a global recession threatening energy demand.
- This was supported after JPMorgan CEO Jamie Dimon said the US and global economy are likely to enter recession by the middle of next year.
- The IMF and World Bank saw rising risks of a global slowdown. Gulf energy news
- Gold declined sharply and fell through the $1700/oz level.
- Bullion prices declined towards the $1,660/oz level and in turn sliding for the 5th straight session.
- A spike in the US dollar and rising Treasury yields keeping gold prices under pressure.
- Last week’s US jobs report cemented a strong Dollar view.
- Meanwhile, Fed Vice Chair Lael Brainard on Monday stressed the need for restrictive monetary policy to bring down inflation.
- Fed decisions will be guided by incoming data as the full effect of previous rate increases become apparent.
- Markets were also kept on edge after the IMF and World Bank warned of a growing risk of a global recession. Kitco metals report.
- Ukrainian President Volodymyr Zelenskyy said in his nightly address on Monday that Ukraine will not be intimidated by the strikes and would make the battlefield “more painful” for Russia as a result.
- He said urgent work was being done to repair and restore power supplies damaged during the strikes.
- The multiple attacks by Russia came several days after a blast partially destroyed the Kerch Bridge that links the Russian mainland to Crimea, which Moscow illegally annexed in 2014.
- Kyiv has not said whether it was responsible for the attack on the bridge, although the blast was widely seen as humiliating for Moscow and President Vladimir Putin. CNBC