View this email in your browser

Morning NOTE

GOOD MORNING

The ZAR weakened on the back of higher than expected US PPI data, as well as Hawkish Fed minutes from the September meeting.

OPENING RATES

• USDZAR 18.3000
• EURZAR 17.7500
• GBPZAR 20.2700

SOUTH AFRICA

• The SA Government said on Wednesday it was extremely concerned about the impact of the ongoing Transnet strike on the economy.
  • The weeklong industrial action is already showing a knock-on effect in the transporting of goods across the country and abroad.
    • Transnet upped its offer from the initial 3% to 4% to between 4% and 5%.
    • Workers demand an increase of between 12% and 13.5%.  EWN
       
• Eskom said stage 2 load shedding will continue to be implemented on Wednesday and Thursday from 4pm to midnight and be reduced to Stage 1 on Friday.
  • Eskom further said it would try to limit power cuts to night-time. IOL
     
• Water crises: Joburg Mayor Dada Morero says the city is looking to expand its water infrastructure due to the population increase in the past five years.
  • The mayor is on Thursday visiting reservoirs and towers as parts of the metro’s battle with water shortages, with hospitals also being affected.
  • He said that the city would implement infrastructure programmes that would curb the rate of water and electricity cuts. Source: EWN
     
• The Sun International group is anticipating that its Sun City resort will have one of its best years ever in terms of operating cash flow,  
  • in the current financial year, following the disruption caused by the Covid-19 pandemic.
  • The group set a target of  R400 million Ebitda  in two or three years’ time,” says Sun International CEO Anthony Leeming.
  • Visitors  having been flocking to the NW resort as it remains the closest point of access to visitors from GP. Moneyweb

GLOBAL MARKETS

Stocks:

• US stock futures trading mixed after the S&P 500 and Nasdaq Composite closed at their lowest in about two years during Wednesday’s session.
  • Traders waiting for key inflation data that could influence the Federal Reserve’s monetary decision in November.
  • Futures contracts tied to the three major indexes were all up about 0.2%.
     
• In regular trading on Wednesday, the Dow shed 0.1%, the S&P 500 fell 0.33% and the Nasdaq Composite lost 0.09%.
  • Those moves came as investors digested minutes from the Federal Reserve’s September meeting, which showed that it expected to keep hiking rates until inflation abates. CNBC

Bonds:

• The yield on the US 10-year Treasury traded higher to 3.93%  after FOMC minutes showed no surprises by reiterating Fed’s commitment to bring inflation down and to raise interest rates further.
  • Attention now turns to the US CPI report due Thursday.
  • Fresh data showed PPI  increased more than expected in September, reinforcing the narrative that the US central bank will keep interest rates higher for longer to cool an overheated economy.
     
• Across the pond ,
  • The UK remains on a knife edge.
    • The yield on UK 10-year Gilts remained near 4.5% on Thursday, close to 14-year highs.
      • The Bank of England programme of temporary gilt purchases is set to end on Friday.
    • On Thursday, the Financial Times reported that the central bank has signalled privately to bankers that it could extend its emergency bond-buying programme.
    • Early in the week, the central bank intervened in the bond market by increasing gilt purchases. Financial Times

YESTERDAY

• The Dow  fell 28 to 29,210
• The SP500 fell 11 to 3,577
• The Nasdaq  fell 9 points to 10,417

•  Image: Trading Economics

OVERNIGHT HEADLINES

• Asian markets sharply lower after hawkish FOMC MINUTES were preceded by higher than expected US PPI DATA.
  • In Japan, the Nikkei 225 fell 0.6% to close at 26,237.
    • The index sliding for the 4th straight session, as investors remained cautious ahead of a key US inflation .
    • Traders aware that the CPI reading could determine if the Fed would deliver another supersized rate hike.
    • Markets also assessed data showing producer prices in Japan rose faster than expected in September as higher raw materials and energy prices, as well as a weak yen drove up input costs.
  • In Australia, the ASX 200 Index shed 0.07% to close at 6,643 on Thursday, reversing gains from earlier in the session.
    • Investors avoided risk assets ahead of key US inflation data that is expected to reinforce bets of another outsized rate hike from the Federal Reserve.
    • Global recession fears and uncertainties surrounding China’s Covid situation also weighed on Australian equities. Reuters

• The US dollar traded above 113, and remaining near 20 years and remaining supported ahead of a highly anticipated inflation reading.
  • Traders expecting CPI to reinforce bets that the Federal Reserve will continue to raise interest rates aggressively.
  • Data released on Wednesday showed that US producer prices increased much more than expected in September.
    • Investors also digested minutes of the Fed’s September meeting, which showed that it expected to keep hiking rates until inflation recedes.
  • The dollar continued to benefit from robust haven demand as well, as the US economy remained resilient in the face of slowing global growth and heightened geopolitical tensions.
  • The Dollar crushing the Yen with 147 briefly reached a 24 year high.  FX news

• Brent crude oil traded below $93/bl on Thursday after losing nearly 6% in the past three sessions.
  • Fears of a global recession and weakening demand outlook and a large build in US crude inventories kept downward pressure on oil prices.
  • OPEC slashed its global oil demand growth forecasts on Wednesday for 2022 and 2023 by 460,000 and 360,000 barrels per day, respectively, citing high inflation, stalling growth in developed economies and China’s Covid lockdowns.
    • The US Energy Department also lowered its expectations for US and global consumption
  • Meanwhile, an industry report showed that US crude stockpiles surged by more than 7 million barrels last week.
  • A hawkish US Federal Reserve minutes also weighed on oil prices, as it committed to raising interest rates to restrictive levels and holding them there until inflation recedes. Gulf energy news
     
• Gold prices traded near $1,670 /oz on, remaining sideways for the 3rd session. Traders avoiding making big bets ahead of key US inflation data.
  • Higher than expected CPI could signal the Federal Reserve could deliver another supersized rate hike next month.
  • Markets also digested the latest Fed meeting minutes, which showed that it expected to keep hiking rates until inflation recedes.
  • Meanwhile, investors continued to prefer the dollar over gold as a safe store of value amid mounting recession risks and heightened geopolitical tensions. Kitco metals

The Bank of England  crises

• The U.K. economy shrank by 0.3% in August, the Office for National Statistics estimated Wednesday, potentially beginning what economists expect will be a lengthy recession through the winter.
  • The Bank of England this week added to its emergency rescue package for British pension funds,
    • A number of pension funds were hours from collapse when the central bank intervened on Sep. 28,
    • and policymakers continue to battle against market volatility with further expansions of the bond-buying scheme on Monday and Tuesday. 
  • The  government brought forward its medium-term fiscal policy plan, having plunged the markets into chaos with its widely-criticized announcements last month.
     
  • Analysts fear the BOE might lose credibility with its Friday deadline, where pension funds were instructed to liquidate “problem” trades.
    • Market yields indicate nothing of the sort has happened, and that the BOE might have to extend this deadline, with Governor Andrew Bailey under severe pressure to do so. CNBC
    • On Thursday, the Financial Times reported that the central bank has signalled privately to bankers that it could extend its emergency bond-buying programme.