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Morning NOTE

GOOD MORNING

The ZAR continued to drift stronger, as traders await today’s US CPI report for December.

OPENING RATES

• USDZAR 16.9100
• EURZAR 18.2100
• GBPZAR 20.5700

SOUTH AFRICA

• President Cyril Ramaphosa has said, that Eskom CEO, Andre de Ruyter, resigned because “it’s a tough job”.
  • Ramaphosa stressing that the government has a “cohesive” plan to resolve the national power shortage.
  • Ramaphosa said the government is not “sleeping on the job” with regard to the worst ever power cuts the nation has experienced.
    • Adding he has spoken to his ministers about the need for a uniform approach to the problem.
  • He did not indicate when a new CEO would be appointed or when load shedding would ease. News24

Eskom crises – stage 6 loadshedding as breakdowns continue.

• In another cruel twist of fate, South Africans are bracing themselves for the ruling on a huge electricity price hike from ESKOM.
• The National Energy Regulator of South Africa (Nersa) is set to rule on Eskom’s revenue application.
  • Households and businesses may have to contend with higher electricity prices if Eskom gets its way.
  • The power utility wants a 32% tariff hike for the 2023/24 financial year, and an additional 9% in 2024/25.
  • Nersa’s court-imposed deadline to rule on the application expired on Wednesday. EWN

RAMAPHOSA VS ZUMA

• President Cyril Ramaphosa is seeking an urgent interdict to stop the private prosecution led by former president, Jacob Zuma.
  • He will have to convince a full bench of judges on Thursday morning to grant an interdict.
  • Ramaphosa approached the court after Zuma charged him with being an accessory after the fact.
    • The charges relating to Zuma’s case against State prosecutor, Billy Downer, and journalist, Karyn Maughan.
    • He has accused them of breaching the NPA Act by leaking his confidential medical records in the arms deal case.
    • Zuma argues that Ramaphosa failed to act after the complaint was made. IOL

GLOBAL MARKETS

Stocks:

• On  Wednesday, the Dow gained 0.8%, the S&P 500 jumped 1.28% and the Nasdaq rallied 1.76%.
  • US stock futures also held steady on Thursday as investors avoided making big bets ahead of a key inflation report.
  • It is widely anticipated that the data could influence the trajectory of Federal Reserve interest rate hikes.
  • Futures contracts tied to the three major indexes were all trading near breakeven.
  • BUT, markets remain cautious following a drumbeat of hawkish remarks from Fed officials this week and ahead of earnings reports from major banks on Friday. Reuters

Bonds:

• The US10YT declined to reach 3.52% ahead of today’s key inflation report.
  • Markets all pricing for a lower inflation print, that would likely allow the Fed to slowdown on its hiking path.
  • Globally interest rates have started to drift lower as inflationary pressures appears to be easing across the globe.
• Across the Pond, the UK’s 10-year yield also fell below 3.5%, down from a two-month high of 3.7% hit in December.
  • Investors have also digested hawkish remarks from key policymakers, warning about the risks of persistent inflation pressures from a tight labour market.
  • All saying it will strongly influence his monetary policy position in the coming months. Bloomberg

Yesterday

• The Dow added 268 to 33,793
• The Sp500 gained 50 to 3,969
• The Nasdaq added 189 to 10,931.

•   Image: Trading Economics

OVERNIGHT HEADLINES

• The US dollar continued its slide towards 103 on Thursday.
  • The Buck sliding back to its lowest levels in seven months as investors cautiously awaited key US inflation data.
  • This correlating to the recent rise in the Japanese Yen.
  • Traders betting a benign inflation December inflation report likely to put more pressure on the Buck.
    • As it could influence the trajectory of Federal Reserve interest rate hikes.
  • Elsewhere, China’s reopening from Covid curbs that bolstered the outlook for the global economy,
    • as well as a budding rally in risk assets also added downward pressure on the dollar.
    • The dollar weakened across the board, with the most pronounced selling against the Japanese yen. FX news

 
THE YEN

• The Japanese yen continued to rise vs the Dollar, reaching 132 /$ and approaching  its strongest levels in seven months.
• This on growing speculations about the Bank of Japan’s possible shift from its ultra-easy policy,
  • after it unexpectedly doubled the ceiling of its tolerance band on 10-year JGBs in December.
• Also, the yen gained  as investors bet that upcoming US inflation data would show further easing.
• Thus supporting the case for a slower pace of interest rate hikes from the Federal Reserve. Forex live

Asian markets all higher across the region.

• Markets mostly rose on Thursday, tracking Wall Street higher.
• In Japan, the Nikkei 225 rose 0.01% to close at 26,450, as investors bet that upcoming US inflation data would show further easing.
  • The data could influence the trajectory of FED interest rate hikes.
  • Also, if lower CPI then the case for a less aggressive tightening lifted Japanese technology stocks.
  • Investors also buoyed after data showed Japan’s current account surplus exceeded forecasts in November.
  • And, bank lending remained solid in December resulting in Japanese banks leading  the gains. CNBC
     
• Brent crude futures rose to $82.5/bl and US WTI crude oil also stabilized around the $77.5/bl level.
  • Prices supported by a “re-opening” of China, and an improved demand outlook from the world’s largest crude importer.
  • Concerns about the impact of sanctions on Russian supply also supported oil prices.
  • Oil prices also firmed up ahead of a key US inflation report, as investors are betting that it would show further easing in price pressures,
  • Thus supporting the case for a less aggressive tightening from the Federal Reserve and help future demand. Gulf Energy News
     
• Gold prices rose above $1,880/oz near its strongest levels in 8 months as the Dollar continues to weaken.
  • Broad based dollar weakness continues to support the yellow metal, as investors cautiously awaited key US inflation data.
  • A lower than expected inflation print likely to drive Gold prices higher as it could influence the trajectory of Federal Reserve interest rate hikes.
  • Investors are betting that the December CPI report would show further easing in price pressures.
  • Gold is highly sensitive to the rates outlook as higher interest rates raise the opportunity cost of holding non-yielding bullion and vice versa. Kitco metals report