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Morning NOTE

GOOD MORNING

The ZAR remained above the R17/$ level ahead of today’s SA CPI and US PPI report.
 

OPENING RATES

• USDZAR 17.0900
• EURZAR 18.4200
• GBPZAR 20.9700

SOUTH AFRICA

• The Public Enterprises Department said that everything possible was being done to end load shedding.
  • The department also warned those obstructing government’s clean-up of power stations must face the full might of the law.
  • This after the country continues to face stage 6 loadshedding.
     
• Mining production in South Africa slumped by 9% year-on-year in November of 2022, after an upwardly revised 11% drop in the previous month and worse than market forecasts of a 6.85% decline.
  • This was the tenth consecutive month of falling mining activity, as prolonged load shedding by electricity supplier Eskom continued to hurt the sector.
  • The largest negative contributors were PGMs (-22%); iron ore (-19.4%) and diamonds (-21.5%).
  • On a seasonally adjusted monthly basis, mining production fell by 0.4%, following an upwardly revised 3% drop in the prior month. source: Statistics South Africa

 
Matric results

• The Gauteng Education Department said that while it saw a 1% drop in the 2021 matric pass rate compared to 2020,
  • the province has registered its highest number of passes in National Senior Certificate history.
  • Education MEC Panyaza Lesufi this morning announced provincial results for the matric class of 2021.
  • The province has the second-highest pass rate in the country at 83.2%.
     
• Meanwhile, The Independent schools board have achieved a matric pass rate of 98.42%.
  • Of the pupils who passed, 89.32% received entry to study a degree.
  • The overall pass rate is slightly up from the 98.39% achieved by the class of 2021.
  • A number of schools saw strong performances, with many reporting multiple distinctions.
  • Some pupils even achieved 100% in subjects, including Faeez Dada from Sacred Heart College, who scored full marks for Maths. EWN

 
ZUMA V CYRIL

• President Cyril Ramaphosa has welcomed the decision by the Johannesburg High Court to interdict his predecessor Jacob Zuma’s private prosecution case against him.
  • Zuma accused Ramaphosa of being an accessory after the fact in the case against State prosecutor, Billy Downer, and journalist, Karyn Maughan.
  • The former president alleges that the pair leaked his medical records, which were used as evidence in his arms deal corruption trial.
  • Ramaphosa said that the court affirmed all his key contentions, such as the urgency of the matter against a court appearance date. IOL

GLOBAL MARKETS

Stocks:
 

• US stock futures fell on Wednesday as the fourth quarter earnings season has so far yielded mixed results.
  • Futures contracts tied to the three major indexes were all down at least 0.2%. In extended trading.
     
• On Tuesday, the Dow and S&P 500 dropped 1.14% and 0.2%, respectively, dragged by the financial sector as Goldman Sachs posted an earnings miss.
• Meanwhile, the Nasdaq Composite rose 0.14%, helped by technology and consumer discretionary stocks.
  • Investors now look ahead to more earnings reports from major firms such as Charles Schwab, PNC Financial Services and Discover Financial, among others. Bloomberg

Bonds:

• The US 10 Year Yield declined to 3.48%, ahead of today’s US PPI inflation report.
  • Global yields also tracking lower after BOJ reaffirmed their commitment to ultra-loose monetary policy.
  • The Bank of Japan (BoJ) maintained its key short-term interest rate at -0.1% and that for 10-year bond yields around 0% during its January meeting by a unanimous vote.
    • The central bank also kept its 0.5% cap for bond buying,
      • defying market speculation and signalling that policymakers aren’t seeking a looser grip on bond yields.
      • BOJ chair, Kuroda maintaining that yield curve management remans achievable.  Reuters

Yesterday

• The Dow declined 391 to 33,910
• The SP500 declined 8 points to 3,990
• The Nasdaq gained 15 points to 11,095

•   Image: Trading Economics

OVERNIGHT HEADLINES

• The dollar climbed toward 103 on Wednesday, lifted by a sharp yen decline after the Bank of Japan defied market expectations for another policy adjustment by maintaining ultra-low interest rates.
  • The BOJ keeping its yield control policy unchanged.
  • Meanwhile, the greenback remained close to its lowest levels in over seven months after data showed that US annual inflation slowed for a sixth straight month to 6.5% in December.
  • The data cemented expectations that the Fed will downshift to a smaller 25 basis point interest rate hike in February after delivering a half-percentage point increase in December.
  • Investors now look ahead to US producer inflation and retail sales data due later on Wednesday that could provide more clues on the central bank’s policy tightening path.

Asian markets

• Asian equity markets were mixed on Wednesday as the Bank of Japan pushed back against speculations of another policy adjustment.
  • The BOJ maintained its ultra-low interest rates and keeping its yield control policy unchanged.
• In China, the PBoC (The People’s Bank of China) injected a total CNY 580 billion of reverse repos into the banking system on Wednesday, while keeping the rate unchanged at 2% and 2.15%, respectively.
  • The central bank said the move aims to maintain the reasonable and sufficient liquidity in the banking system, according to an online statement.
• In Japan, the Nikkei 225 rose 0.5% to around 26,266, after the BOJ policy decision.
  • The Bank of Japan (BoJ) maintained its key short-term interest rate at -0.1% and that for 10-year bond yields around 0% during its January meeting by a unanimous vote.
  •  Japanese stocks have come under pressure in the lead-up to the BOJ decision as 10-year JGB yields continued to test the upper ceiling of the central bank’s tolerance range,
  • fuelling concerns the bank might tweak its yield control policy again this week.
  • Investors also reacted to data showing the sentiment of Japanese manufacturers declined sharply in January due to rising costs and economic uncertainties.  Reuters

• Brent crude oil rose above $86/bl, closing in on its highest level since early December, as hopes for a demand recovery in China after its rapid exit from zero-Covid policy outweighed fears of a global economic slowdown.
  • A top Chinese economic official said at the World Economic Forum that the world’s second largest economy and top crude importer;
    • will likely rebound to its pre-pandemic growth trend this year as Covid infections passed their peak.
  • On the supply side, investors remained concerned about the expected impact of the latest Western sanctions on Russian flows in response to the war in Ukraine. Gulf Energy News
     
• Gold fell to $1,900/oz, sliding for the third straight session as the dollar rebounded from recent lows.
  • Bullion continues to benefit from bets for a slower pace of interest rate hikes from the US Federal Reserve.
  • Latest data showed that US consumer inflation eased further to 6.5% in December, signalling that prices may have peaked at 9.1% in June.
  • The data and bolstering expectations that the Fed will downshift to a smaller 25 basis point rate increase at its February meeting.
  • Investors now look ahead to US producer inflation and retail sales data due later on Wednesday that could provide more clues on the US central bank’s policy tightening path.
  • 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