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Morning NOTE

GOOD MORNING

The ZAR rebounded and consolidated off its weakest levels reached on Monday during poor liquidity conditions.

OPENING RATES

• USDZAR : 18.3500
• EURZAR : 20.0500
• GBPZAR : 22.8300

SOUTH AFRICA

• Top  African National Congress (ANC) leaders were on Tuesday evening due to meet with the party’s former leader Thabo Mbeki.
  • They were here to discuss current President Cyril Ramaphosa’s Phala Phala saga.
  • The meeting was expected to take place at the ANC’s Luthuli House headquarters in Johannesburg.
  • This follows a leaked letter by the former statesman to ANC Deputy President Paul Mashatile.
  • Mbeki raised concerns over the ANC’s handling of the allegations surrounding the theft of millions at Ramaphosa’s Limpopo-based farm.
  • However, top ANC leader’s calls on Mbeki to use his ‘wisdom’ to ‘counsel’, rather than criticise Ramaphosa
     
• Massive electricity outage still affecting large parts of Pretoria
  • The collapse of several electricity pylons, partly because of vandalism, forced the closure of a section of the N4 highway over the long weekend.
  • Significant parts of Pretoria east and north are still without electricity following the collapse of several electricity pylons during a storm on Sunday night. Moneyweb
     
• South Africa’s central bank Governor Lesetja Kganyago called for sweeping reforms to macroeconomic policies to boost economic growth, and lessen exchange rate volatility and sovereign risk.
  • Proposed changes include structural reforms,
  • deregulation of the nation’s transport and electricity sectors,
  • lowering the inflation target and a shift back to predictable, transparent fiscal policy rules.
  • Kganyago said in a speech at the Peterson Institute for International Economics in Washington Tuesday.
  • Lowering the inflation target to 3%, the bottom of the current range, will be a “major benefit to fiscal policy” and economic growth, the governor said.
  • It will also reduce the potential for an upward drift in the real exchange rate and cut loan-service costs for the country’s over-indebted public sector, he said. Moneyweb

GLOBAL MARKETS

STOCKS

• US stock futures held steady on Wednesday as investors cautiously awaited a key US inflation report.
  • The CPI DATA could influence the trajectory of the Federal Reserve’s interest rate decision in May.
  • Futures contracts tied to the three major indexes drifted flat to slightly positive.
     
• In regular trading on Tuesday, the Dow rose 0.29% and the S&P 500 ended flat, while the Nasdaq Composite fell 0.43%.
  • Nine out of the 11 S&P sectors finished higher led to the upside by energy, while technology stocks underperformed the market.
  • Last week’s jobs data pointed to a still-tight labour market, reinforcing bets of another 25 bps rate hike in May but easing some concerns that the US economy is near recession.
  • Investors now await a slew of economic data and corporate results,
  • Earnings include those from big US banks, for clues about the economy’s health and the likely future path of interest rates.

BONDS

• The yield on the US 10-year moved higher above 3.41% to kick off the second week of April.
  • Traders 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.
  • Citing  the payrolls report, continues 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%.

Yesterday

• The Dow gained 98 points to 33,684
• The SP500 flat at 4,108
• The Nasdaq lower 52 points to 12,031

  image: Trading economics

OVERNIGHT HEADLINES

The US Dollar

• The US dollar held around 102.1 in subdued trade on Wednesday after losing some ground in the previous session.
• Investors cautiously awaited a key US inflation report that could influence the Federal Reserve’s interest rate decision in May.
  • A slew of Fed speakers offered little clues on how much further US interest rates would rise,
  • Earlier, New York Fed President John Williams saying that the central bank’s policy path will depend on incoming data.
  • Money markets are now pricing in a much higher chance that the Fed will deliver another 25 basis point rate hike next month.
    • Meanwhile, Philadelphia Fed Bank President Patrick Harker said Tuesday he feels that the end of rate hikes may be near.
    • Money markets are pricing in a roughly 74% chance that the US central bank will raise rates by 25bps in May.
    • BUT multiple rate cuts are also being priced in as early as July through to the end of the year. FX NEWS

Asian markets
Stock markets in the Asia-Pacific region were mostly higher on Wednesday.

• However, investors avoided taking a lot of new positions ahead of the US inflation and FOMC release later in the day which could provide further clues on the Fed’s next steps.
• in Japan, the Nikkei 225 Index climbed 0.6% to close at 28,083, with both benchmarks rising for the fourth straight session.
  • But, the  market caution capped gains ahead of a highly anticipated US inflation report that could influence the Federal Reserve’s interest rate decision in May.
  • Recall, the new BOJ governor Kazuo Ueda said it was appropriate to maintain the bank’s ultra-loose monetary policy.
  • His reasons : inflation has yet to hit 2%.- the comments boosting market sentiment.
• In China, the Shanghai Composite rose 0.4% to above 3,320. Stocks struggling for direction amid a lack of clear market signals.
  • On Tuesday, data showed that China’s consumer inflation unexpectedly slowed in March, while producer inflation eased further to a 33-month low.
  • The inflation figures suggested persistent demand weakness, but raised hopes for further policy easing. Reuters

Crude oil

• US WTI crude oil prices remained above $81/bl after jumping more than 2% in the previous session.
• Prices underpinned by signs of tighter global oil supplies and an industry report that pointed to another decline in US crude inventories at a key storage hub.
  • Shipments from Russia have weakened after Moscow vowed to reduce production.
    • Bloomberg reported. In the US, data from the American Petroleum Institute (API) showed that;
  • US crude stockpiles at the nation’s key storage hub at Cushing, Oklahoma contracted by 1.4 million barrels last week.
  • The US oil benchmark is also trading close to its highest levels in over two months,
• Price remained supported by a surprise announcement from OPEC+ that it will reduce output by 1.16 million barrels per day from May until the end of 2023. Bloomberg energy

Gold

• Gold prices rallied and once again reached  $2,020/oz.
  • Prices continuing its upside momentum for the second straight day, amid a pullback in the US dollar.
    • Market participants put their focus on key US inflation data due later today for clues on the path of Federal Reserve interest rate hikes.
• Elsewhere, the IMF said Tuesday it expects global growth of 2.8% this year and 3% in 2024, slightly below the fund’s estimates in January.
  • The fund added that the pressures in the banking sector have dissipated in recent weeks, but they have made the overall economic picture worse.
  • Lower rates will boost the appeal of Gold. Kitco metals report