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Morning NOTE

GOOD MORNING

The ZAR consolidated near stronger levels after a raft of disinflationary data supported a dovish US FED Pivot.

OPENING RATES

• USDZAR : 18.0500
• EURZAR : 19.8400
• GBPZAR : 22.4100

SOUTH AFRICA

• Eskom announced that the country will remain in stage 6 load shedding until further notice.
  • However, according to some data, the country was silently dragged into stage 8.
  • As the country was thrust into all-day stage 6 load shedding this week, data published on Friday revealed that Eskom had actually cut over 7,000MW of power from the grid on Thursday.
  • By Eskom’s own definitions, this is equal to 8 stages of load shedding.
  • The group explained the figure away by noting that the figure was around 5,700MW cut from the national grid (stage 6 load shedding)
    • plus a further 1,400MW from its contracted customers (stage 4 load curtailment).
       
• Eskom update on loadshedding: Following the tripping of unit 2 at Koeberg Power Station this morning,
  • Stage 6 #loadshedding will be implemented from 16:00 this afternoon until further notice. Eskom will communicate as soon as any significant change occurs.
     
• The City of Tshwane said that it would be meeting with Rand Water’s management this week to establish the structural challenges that have been leading to water outages.
  • The city has been experiencing interruptions since last week after a cable theft incident led to a power outage at Rand Water’s Mapleton pump station.
  • This outage led to water outages and interruptions across the City of Tshwane and some parts of Ekurhuleni.

GLOBAL MARKETS

Stocks

• US stock futures rose on Monday as investors look ahead to a raft of earnings reports this week to gauge the health of corporate America.
  • The  Dow and S&P 500 futures rose 0.2%, while Nasdaq 100 futures were flat.
     
• Last week, the Dow gained 1.2% for its fourth straight weekly advance, while the S&P 500 and Nasdaq Composite ended 0.79% and 0.29% higher, respectively.
   
• Those moves came as investors reacted to signs of cooling inflation in the US and better-than-expected earnings reports from major banks despite the recent turmoil in the financial sector.
   
• However, investors continued to grapple with a highly uncertain outlook for the economy and interest rates,
  • with the Federal Reserve intent on bringing down inflation despite projecting a mild recession later this year.

Bonds

• The yield on the US 10-year note jumped to over 3.5% on Friday.
• It was the highest in two weeks, as investors continued to monitor the latest economic data for insights on the Federal Reserve’s path for the rest of the year.
• Last week, US retail sales contracted more than expected in March, although upward revisions for the prior month softened worries about low consumer activity.
• At the same time, strong corporate results from US banks downplayed systemic risks from the bank runs in March, giving the Fed more room to increase interest rates.
   
• Earlier data showed that producer and consumer inflation were lower than expected in March, while unemployment claims and non-farm payrolls showed some job market softening.

On Friday

• The Dow declined 143 to 33,886
• The SP500 fell 8 to 4,137
• The Nasdaq fell 42 to 12,123

  image: Trading economics

OVERNIGHT HEADLINES

The US Dollar

• The US  dollar rose toward 102 on Monday, rebounding further from one-year lows as the American economy’s resilience and strong earnings from major US banks.
  • The data bolstered market expectations for another interest rate hike in May.
  • US retail sales fell more than expected in March, but retail sales remained solid.
    • Meanwhile, US consumer sentiment unexpectedly increased in April and inflation expectations for the year ahead jumped to a five-month high of 4.6%.
    • Elsewhere, better-than-expected first quarter earnings results from JPMorgan, Citigroup and Wells Fargo eased market concerns about the recent banking turmoil.
  • Markets are currently pricing a 25 basis point rate hike from the Federal Reserve in May.
  • The dollar strengthened across the board, with the most pronounced buying activity against the euro and sterling.  FX news

Asian markets

• Asian markets higher across the board on the back of positive risk sentiment following comments from Us treasury secretary Janey Yellen,
  • that “…the banking system remains sound…” and that the recent banking crises, will likely result in a halt by the Fed.
• In Japan, the Nikkei 225 inched up 0.07% to close at 28,545 hitting its highest levels in five weeks, helped by gains in heavyweight banking stocks.
  • Those moves came on the heels of a strong week as solid corporate results and dovish remarks from new Bank of Japan governor Kazuo Ueda lifted Japanese shares.
  • Gains in the financial sector were led by Mitsubishi UFJ (2.6%), Sumitomo Mitsui (2.5%) and Mizuho Financial (2.1%).
  • Other index heavyweights also advanced, including Nippon Yusen (3%), Toyota Motor (1.4%), SoftBank Group (1%), Hitachi (1.3%) and Panasonic Holdings (3.5%). Reuters

Crude oil

• WTI crude futures held above $82 per barrel on Monday after gaining more than 2% last week,
  • as the IEA warned that a surprise production cut by OPEC+ will tighten the market more than expected and drive oil prices higher.
  • The IEA also projected in its April Oil Market Report released Friday that world oil demand would climb by 2 million barrels per day in 2023 to a record 101.9 million bpd.
  • Elsewhere, markets continued to fret about shrinking crude inventories at a key US storage hub, interrupted flows from Iraqi Kurdistan and signs of slowing Russian oil exports.
  • Moreover, investors remained optimistic about Chinese demand, as data showed that the world’s top crude importer shipped in the most oil in almost three years last month. Gulf energy news

Gold

• Gold prices were trading around $2,016 / OZ  on Monday, trying to recover from a 2% plunge of below $2,000 Friday.
  • However prices, one-year highs hit late last week, with mixed US economic data prompting market participants to reassess the Federal Reserve’s rate hike path and boosted the dollar.
  • Monthly US producer inflation unexpectedly fell in March, backing the lower-than-projected CPI print.
  • Elsewhere, Fed governor Christopher Waller said the central bank still needs to raise borrowing costs,
    • while Atlanta Fed President Raphael Bostic said one more 25bps hike can allow the Fed to end its tightening cycle. Kitco metals