View this email in your browser

Morning NOTE

GOOD MORNING

The ZAR consolidated its gains below R17/$ on the back of improved global Risk sentiment following the benign inflation report.

OPENING RATES

• USDZAR 16.7900
• EURZAR 18.2200
• GBPZAR 20.5700

SOUTH AFRICA

• The Eskom crises continues with the country now indefinitely at stage 6 .
  • Earlier Cyril Ramaphosa, cancelled his trip to the WEF in DAVOS Switzerland to meet with his cabinet to discuss the escalation of load shedding.
  • He  was scheduled to travel to the annual meeting of world leaders, business and civil society which gets underway from Monday until Friday.
  • The president was meant to promote SA as an investment destination, a position many citizens believe we are drifting away from thanks to the challenges currently facing the country. EWN
     
  • The DA also planning a march to Luthuli house in protest again the recent electricity price hikes by NERSA.
    • NERSA granting Eskom’s request for an 18% price hike.

• Phoenix KZN erupted in protests as residents faced power outages for more than 40 hours.
   
• President Cyril Ramaphosa has approached the courts for relief from Jacob Zuma’s private prosecution of him in his matter against State prosecutor, Billy Downer, and journalist, Karyn Maughan.
  • Judgment will be handed down on Monday morning in the Johannesburg High Court.
  • It what is widely seen as a presidential showdown between President Cyril Ramaphosa and his predecessor, Jacob Zuma.
  • Ramaphosa has approached the courts for relief from Zuma’s private prosecution of him in his matter.
  • Zuma has accused Downer and Maughan of leaking his confidential medical records in the arms deal case and he is charging the president for failing to act against them.
  • The matter was heard by a full bench last week. EWN

GLOBAL MARKETS

Stocks:

• Major US stocks closed in the green on Friday, after investors digested new economic data and parsed a slew of earnings releases from big banks.
  • The Dow closed 0.3% higher and reported its best week since November.  The S&P 500 added 0.4% while the Nasdaq 100 gained 0.7%, its longest winning rally since 2021.
  • For the week, the Dow added 1.6%, while the S&P 500 and Nasdaq 100 added 1.7% and 3.1%, respectively. US markets will be closed on Monday for a holiday 
  • On the corporate side banks warning of a recession as JP Morgan set aside $1.5billion as a provision if such events occurred.

Bonds:

• The yield on the US 10-year Treasury note bottomed at  3.4% before rebounding to 3.51%.
• The prospects of a less aggressive Federal Reserve boosted appetite for government debt.
• As broadly expected, inflation in the US slowed for a sixth consecutive month to 6.5% in December, offering hope that price pressures have peaked and giving the Federal Reserve room to slow its pace of rate hikes.
• At the same time, concerns mount that the US is heading for a recession this year, with several sectors of the economy, including housing, industry, and, more recently, services, flashing recessionary signs.
• Money markets are now pricing an over 90% chance that the US central bank will hike rates by 25 basis points in February 2023.

On Friday

• The Dow gained 112 to 34,302
• The SP500 gained 15 to 3,999
• The Nasdaq  gained 78 to 11,079

•   Image: Trading Economics

OVERNIGHT HEADLINES

• The dollar index weakened below 102 in thin holiday trading on Monday, before recovering as traders play the ranges.
  • The Buck hitting its lowest levels in over seven months as easing US inflation and related expectations sparked hopes for less aggressive interest rate hikes from the Federal Reserve.
  • The annual inflation rate in the US slowed for a sixth straight month to 6.5% in December, in line with market forecasts.
  • That was also the lowest reading since October 2021, raising hopes that inflation peaked in June at 9.1
  • The dollar weakened across the board, with the most pronounced selling against the risk-sensitive New Zealand and Australian dollars.
     

• Asian markets mixed following a rally on Friday in New York and a US holiday on Monday.
  • In Japan, the Nikkei 225 fell 1.14% to close at 25,822, extending losses from the previous session as a sharp yen rally dimmed the outlook for Japanese exporters.
    • Investors also remain cautious ahead of the BOJ  policy meeting on Wednesday as the market continued to pressure the central bank to tweak its yield control policy again.
    • Japanese stocks have recently underperformed global peers as expectations of a hawkish policy shift from the BOJ.
    • It  coincided with a sharp Yen rally affecting exports .
  • In Australia, the ASX 200 Index rose 0.82% to 7,388 on Monday, closing at its highest level in over eight months.
    • Australian shares also tracked US stocks which closed at the highest in a month as easing inflation expectations fuelled a global equity rally at the start of the year.
    • Technology stocks led the charge, while energy, coal and gold stocks also advanced.
       
• Brent crude oil steadied near $85/bl as investors weighed an improving demand outlook in China against the prospect of an economic slowdown in other major economies.
  • The international oil benchmark rallied more than 8% last week as China’s reopening from Covid curbs raised hopes for a boost in economic activity and mobility.
  • Top analysts forecasting oil demand in the top crude importer will likely hit a record this year.
  • Easing inflation expectations in the US also bolstered bets for less aggressive interest rate hikes from the Federal Reserve, fuelling a rally in risk assets.
     
• Gold blasted through the $1900/oz level  the back of a faltering Dollar.
  • On Monday, Gold rose above $1,920, hovering at its strongest levels in nearly 9 months as easing US inflation sparked hopes for less aggressive monetary tightening from the Federal Reserve.
  • The annual inflation rate in the US slowed for a sixth straight month to 6.5% in December, in line with market forecasts.
    • That was also the lowest reading since October 2021, raising hopes that inflation peaked in June at 9.1%.
    • Money markets are now pricing an over 90% chance that the central bank will downshift to a smaller 25 basis point rate hike in February
    • Gold is highly sensitive to the rates outlook as higher interest rates raise the opportunity cost of holding non-yielding bullion, and vice versa.