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Morning NOTE

12 May 2023


The ZAR traded to a record low, after the US accused SA of supplying weapons to Russia in its fight against Ukraine.


The Rand price action dominating by the headline that SA supplied weapons to Russia in its fight against the Ukraine.

  • In what was deemed a diplomatic disaster, the global investor community did not take kindly to it.
    • And SA assets sold off across the board.
  • The Rand the primary target as the local unit lost more than 4% to trade at R19.5000/$ in early trading.
    • The ALSI however remaining robust with the main board at 78,279 as local resource stocks ( gaining from a weaker Rand), drive the markets higher.
      • SA yields taking a pasting as the generic 10Y yield reached 11.11%
  • The Rand sell-off accelerating as traders and economists in general agreement that any withdrawal of US investment would be one step too far for South Africa.
    • This come after US ambassador to South Africa Reuben Brigety claimed that a Russian cargo ship left the Simon’s Town navy base camp in Cape Town last December with arms on board.
      • Brigety said the weapons were to support Russia’s ongoing invasion of Ukraine.
    • In his response, presidential spokesperson Vincent Magwenya accused Brigety of poor diplomatic skills.
      • Investment expert Graeme Korner of the Korner Perspective weighed in saying
      •  “You know really, about 50% of our exports go to US, Europe and countries that have a strong position against the occupation of Ukraine.”
  • Globally, US inflation and employment data indicating a slow down in the US price pressures that would likely result in a FED pause.
  • Major markets higher across the board.
  • The only concern remains the US debt ceiling impasse and the Turkish General election where incumbent Erdogan appears to be trailing in the polls.
  • Markets also nervous around the uncertainty of the election .

Markets this morning

  • USD 102
  • SP500 4145 +0.31%
  • EURUSD 1.0925  +0.14%
  • US10YT 3.39%

Data This week

  • 08H00 : UK GDP 0.2% EXPECTED VS 0.6% PREVIOUS

Market Movement Today:

The Rand dramatically weaker after the USA accused surprised SA of supplying weapons to Russia in its fight against the Ukraine.

  • The local unit passing R19.5000/$; R21.33/ euro and R 24.246/pound
  • US ambassador, Rubin Brigety, mentioned the Russian Vessel was loaded with weapons in December.
  • The markets reacted negatively to the news with the Rand losing more than 4%, to reach 19.5000 in early Johannesburg trading.
  • The investor community turning a blind eye to SA and the sell off continued in local bonds (10Y @11.11%).
  • Adding to the local units woes are the ongoing Eskom energy crises.
  • Globally inflationary concerns continues to decline as US PPI printed lower than expected.
  • The data providing support to global risk complex.

However, the main topic remains the SA Russia story and the Rand likely to remain under pressure in this environment.

Markets this morning

  • USD 102
  • SP500 4145 +0.31%
  • EURUSD 1.0925 +0.14%
  • US10YT 3.39%
  • Trade : ZAR under pressure (until the SA government denies any involvement) BUY USDZAR

Expected Ranges:

  • USDZAR : Expect a range 18.9200-19.5200
    • Importers : 19.1200-18.9200
    • Exporters : 19.3200-19.5200
  • EURZAR : Expect a range of 20.5100-21.7400
    • Importers : 20.9200-20.5100
    • Exporters : 21.3300-21.7400
  • GBPZAR : Expect a range of 23.9800-23.7600
    • Importers : 23.9800-23.7600
    • Exporters : 24.2000-2404200


  • USDZAR : 19.3000
  • EURZAR : 20.7200
  • GBPZAR : 24.1000


  • Selloff of SA Inc gathers pace
    • The JSE’s 1% decline on Thursday masks the extent to which investors have dumped companies that hold most operations locally.
      • The selloff of so-called ‘SA Inc’ shares accelerated on Thursday with near-indiscriminate selling of assets as the rand continued to plummet against major currencies.
      • The JSE’s 1% decline on the day masked the extent to which those JSE-listed companies with the majority of their operations in South Africa were dumped by, presumably, foreign investors.
  • Sygnia CEO calls for urgent national elections
    • If this continues, it’s too horrifying to think, then I think you will have a significant decline of the formal economy as we know it: Magda Wierzycka.
    • Magdalena Wierzycka, chief executive officer of Sygnia, has come out guns blazing, saying South Africa has crossed the line into a failed state.
    • She has also suggested that more pressure be put on government to move next year’s general election forward to 2023.


  • On Thursday, the Dow and S&P 500 fell 0.66% and 0.17%, respectively, while the Nasdaq Composite rose 0.18%.
  • Those moves came as Disney’s disappointing subscriber numbers and PacWest Bancorp’s report of a drop in deposits weighed on investor sentiment.
  • Meanwhile, Google-parent Alphabet jumped 4.3% after the company said it would expand its use of artificial intelligence at its developer conference.
  • This morning, markets higher after the major averages ended mixed during Thursday’s regular session.
  • On the data front, producer and consumer prices eased more than expected in April while weekly jobless claims unexpectedly rose to the highest since October 2021,
    • raising the odds that the Federal Reserve may soon pause its policy tightening.
  • Also, the ongoing debt ceiling impasse is being closely monitored by investors following recent talks between President Joe Biden and congressional Republicans, which showed little progress. Cnbc


  • The yield on the US 10-year fell to the 3.35% level in the second week of May.12, 2023.
  • It was hovering at its lowest in over one month as evidence of slower inflation and a softening labour market strengthened bets of a dovish outlook for the Federal Reserve.
  • YOY PPI in the United States slowed more than expected in April, in line with a previous report showing that consumer prices decelerated for the tenth straight month.
    • In the meantime, initial unemployment claims soared to an 18-month high at the beginning of May and added to recent data pointing to a softening labour market.
    • The developments drove swaps to firmly price a tightening pause by the US central bank in its next meeting and raised expectations of multiple rate cuts this year.
    • Additionally, sharp deposit outflows from regional US banks strengthened demand for the safety of Treasuries. Reuters


  • DOW fell 221 to 33,309
  • SP500 -7 to 4130
  • NASDAQ +25 to 13415 unchanged

  image: Trading economics


The US dollar

  • The US dollar firmed up around 102 on Friday and was set for its first weekly gain in three, even after a slew of data pointed to a slowing US economy and supported the case for the Federal Reserve to pause its interest rate hike next month.
    • US consumer inflation unexpectedly slowed to 4.9% in April and fell below 5% for the first time in two years, while producer inflation rose less than expected.
    • The weekly jobless claims also jumped to a 1-½-year high last week, pointing to a weakening labour market as demand slows.
      • Markets are currently priced for a 98% chance that the Fed would keep rates unchanged in June, while rate cuts are projected by the end of the year.
      • Elsewhere, investors continued to monitor risks surrounding the banking sector and the US debt ceiling impasse. Fx news

Asian markets

  • Markets higher across the region as traders digest weaker than expected US producer inflation data, that will ultimately result in the Fed pausing.
  • In Japan, the Nikkei 225 Index jumped 0.9% to close at 29,388, with the index trading over 17-month highs, lifted by gains in technology and consumer-related stocks.
    • Meanwhile, investors remain cautious amid mixed domestic earnings results, while continuing to assess the economic and monetary policy outlook globally.
    • Gains in the technology and consumer sectors were led by Tokyo Electron (3.2%), Sony Group (1.8%) and Toyota Motor (1.4%).

Crude oil

  • US WTI crude futures weakened below $71/BL on Friday and were set to end the week slightly lower.
    • Traders navigated a volatile period marked by conflicting demand and supply factors.
    • Oil prices jumped at the start of the week as the Biden administration said it was cancelling some 140 million barrels of previously mandated crude sales from the Strategic Petroleum Reserve and will purchase crude to refill the SPR later this year.
    • However, the market gave up those gains towards the end of the week as EIA data showed an unexpected increase in US crude inventories,
      • exacerbating concerns about weakening demand in the world’s top oil consumer.
    • Trade data from China also showed that crude oil imports fell 16% annually to 10.6 million barrels per day in April, adding to fears of a slowdown in Asia’s largest economy. Gulf energy news


  • Gold prices fell to below $2,020/oz extending its decline from the near-record-high of $2,050 on May 5th as a firmer US dollar made gold more expensive for foreign purchasers, weighing on buying volumes.
    • Still, a batch of new economic data underscored current trends of lower inflation and a slower labour market in the United States,
      • strengthening expectations that the Federal Reserve will pause its tightening cycle in its next meeting.
    • Producer inflation fell more than expected in April, backing hopes of subdued prices after a cooler-than-forecasted CPI print for the period.
      • At the same time, weekly unemployment claims rose the most since October 2021, suggesting that higher borrowing costs are having a greater impact in the US economy. Kitco metals

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