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Morning NOTE

18 October 2022


RISK ON: The ZAR tracking global markets higher as stocks rebounded following stronger than expected corporate earnings.


  • The Rand breached the R18/$ level for the first time since last week’s higher than expected US inflation report.
  • News of stronger than expected US corporate earnings as well as a reversal in policy from the New UK prime minister, sent markets higher.
    • Risk On across the board as the UK promised fiscal responsibility and declared to no longer favour heavy tax cuts.
      • In the mess Kwasi Kwarteng was asked to resign as Finance minsters and was replaced by Jeremy Hunt.
  • Markets continuing the theme this morning, with Asian stocks also higher as the region responded to the optimism on Wall street.
  • The ZAR and other risk assets all finding some relief and with no heavy data sets out this week, we could continue on this path.
  • Locally, 
    • ESKOM moved SA back to stage 4, on the back of further breakdowns.
    • Rand-Water continues to ask residents to use water sparingly.
    • On the positive side, the Transnet strike ended,
      • but economists are all estimating the damage done to an economy struggling to recover from
      • Covid-19, high inflation, higher interest rates, high fuel prices, black outs and now water cuts.

Significant Market Data: (Data this week skewed towards FED speaker and Wednesday.)

  • Wednesday
  • High risk event : 26 OCTOBER 2022  :  SA MEDIUM TERM BUDGET SPEECH.


  • The ZAR gained dramatically on Monday, following a global Risk On session.
    • With stocks rallying across the board NON DOLLAR assets all stepped to the front and the local unit benefitted handsomely from the demand.
    • The ZAR breaching the R18 handle to briefly reach 17.9350 before rebounding in early Joburg trading.
  • This morning, Importers likely to step up and cover risk around the R18 big figure ,
    • as it has been perceived as a missed opportunity the last couple of weeks.
    • We can expect a spike above the figure to 18.0700 and a break targets 18.2100 (good short term SELL USDZAR Levels).
    • However, unlike before and on the back of no new Risk surprises or inflationary worries;
  • We can expect another positive showing for the local unit, with the levels mentioned indicating areas to SELL USDZAR.
  • With risk events only tomorrow i.e. SA inflation and  the FED rate decision only on 1-2 November 2022,
    • The local unit is not expected to weaken aggressively from current levels.  
    • AND Tomorrow’s, CPI if higher than expected, will be ZAR supportive.
  • Unfortunately, we need to keep things in perspective and …
  • The drivers will continue to be US INFLATION (HIGHER AGAIN) AND US FED POLICY.


Expected Ranges

  • USDZAR :  Expect a range 17.8100-18.2100
    • Importers 17.9300-17.8100
    • Exporters 18.0700-18.2100
  • EURZAR :  Expect a range of 17.5900-17.8900
    • Importers 17.6900-17.5900
    • Exporters 17.7900-17.8900
  • GBPZAR :  Expect a range of 20.2700-20.6600
    • Importers 20.4000-20.2700
    • Exporters 20.5300- 20.6300


  • USDZAR 17.9800
  • EURZAR 17.7200
  • GBPZAR 20.4200


  • ESKOM :Stage 4 power cuts have been implemented until further notice.
    • “Stage 4 load shedding was implemented this morning at 5.30am due to the breakdowns of five generators at five power stations overnight.
    • The load shedding will be implemented until further notice.” EWN
  • After a few cuts, motorists are bracing for more fuel price hikes
    • The AA said on Monday mid-month data from the CEF, showed that petrol prices were expected to increase by between 41 and 51 cents a litre.
    • But it said the real concern was the likely increases to diesel prices with the data showing that it is set climb by around R1.60.
    • The AA said the impact of such a high increase in the diesel price would have a significant impact on consumers.
    • The main contributors to the increases were higher international oil prices, and to a lesser extent, the weaker rand. EWN
  • SOE logistics company Transnet, announced it has reached a new 3-year wage deal with its majority union, the United National Transport Union (Untu).
    • The deal likely to ease congestion at SA ports as more than half the workforce returns to work.
    • The strike, which entered its second week on Monday, has disrupted railways and ports and affected key sectors of the economy.
    • This included large foreign-exchange earners such as agriculture and mining.
    • It has been costing mineral exporters nearly R1bn a day as they were unable to load crucial minerals onto ships at the ports. IOL


  • US stock futures higher this morning after the major markets posted strong gains during Monday’s session.
    • Traders citing solid earnings reports, while the reversal of nearly all planned tax cuts in the UK lifted sentiment further.
    • Futures contracts tied to the three major indexes were all up at least 0.7%. In regular trading on Monday, the Dow and S&P 500 jumped 1.86% and 2.65%.
    • All S&P sectors finished higher, led by consumer discretionary, real estate, communication services, technology and financials.
  • Those moves came as better-than-expected quarterly results from major firms including Bank of America allayed fears about a possible recession.
    • Meanwhile, analysts continued to debate whether markets are at the start of a new bull rally or currently undergoing a bear market bounce.


  • The US 10-year yield, traded at 3.94% moving away from a 14-year peak of 4.1% touched last week.
  • The market movement came along with a sharp rally in gilt markets as investors welcomed the UK’s government U-turn on its fiscal plan.
    • New finance minister Jeremy Hunt said the government would reverse almost all the tax changes announced in the mini-budget several weeks ago.
    • Still, market participants continued to worry over high inflation and interest rates and their impact on the economy.
    • Last week, a hot US inflation reading slashed any hopes of a policy pivot.
  • United Kingdom 10Y Bond Yield was 3.97%, lower after the UK PM reversed course and new finance minister, Hunt, announced that they have scrapped their plans for all the tax cuts.
    • Instead promising to markets to behave fiscally responsible.


  • The Dow added 550 to 30,185
  • The SP500 added 94 to 3,677
  • The Nasdaq gained 354 to 10,675


Asian markets HIGHER  across the board following a strong rally on Wall Street.

  • In Japan, the Nikkei 225  jumped 1.4% to around 27,150, erasing losses from the previous session and taking the lead from a strong rally on Wall Street.
    • Traders citing solid earnings reports and the reversal of planned tax cuts in the UK lifted sentiment.
    • Upbeat corporate outlooks for domestic firms also supported stocks, with a weakening yen set to boost the profits of export-heavy Japanese industries.
    • However, rapid falls in the currency which sank to a fresh 32-year low raised concerns about another intervention.
  • In Australia, the ASX 200 Index jumped 1.72% to close at 6,779, recouping some losses from the previous session.
    • The market taking the lead from a strong rally on Wall Street overnight, with technology stocks leading the advance.
      • Sentiment was lifted by upbeat earnings reports from major US banks which signaled economic resilience, as well as the further reversal of planned tax cuts.
      • In addition, RBA Deputy Governor Michele Bullock,  said the RBA expects to raise interest rates further over the coming months.
      • Minutes of the RBA’s October meeting also showed that the surprise decision to slow the pace of rate increase was “finely balanced”.
      • The RBA delivered a smaller-than-expected 25 basis point rate hike earlier this month, defying expectations for a bigger half-percentage point increase,
      • but has now raised interest rates by a total of 250 basis points to 2.6% since May.
  • The US dollar fell below the 112 level, and struggled to gain traction as risk appetite returned to the markets, with the reversal of almost all of UK’s planned tax cuts helping sentiment.
    • The most pronounced selling activity was against the New Zealand dollar which rallied on higher-than-expected Q3 inflation numbers.
    • This was followed by the Australian dollar which gained on hawkish remarks from a central bank official.
    • Meanwhile, the greenback remains supported by expectations that the Federal Reserve will tighten policy further to get ahead of inflation. 
  • Crude oil WTI futures trading around the $85/bl level as traders weighed the prospect of tighter oil supplies against fears of a demand-sapping global recession.
    • Brent crude futures also steadied above $91/bl, on the same concerns.
    • Markets are gearing up for more large OPEC+ output cuts from November.
    • Traders and refiners are booking storage tanks in anticipation of a supply crunch as the European Union embargo on Russian oil takes effect in December.
    • In China, expectations of loose monetary policy and more pro-growth measures buoyed the demand outlook in the world’s top crude importer.
    • But  prices continue to face downward pressures;
      • from aggressive monetary tightening aimed at curbing inflation that markets fear would tip the global economy into recession. Bloomberg
  • Gold prices steadied around $1,650/oz, pausing a recent slide as the dollar lost some ground after the UK reversed almost all of its planned tax cuts.
    • The move boosting risk appetite in the market.
    • Meanwhile, expectations that the US Federal Reserve will tighten further to bring down inflation continued to weigh on the metal.
    • Latest data showed another hot inflation report in September support the case for more rate hikes.
    • Gold also continued to underperform , as rising US interest rates drove investors to seek shelter in the dollar. Kitco metals

Crypto warnings

  • As the Crypto Winter intensifies, Bitcoin could break below its $18,000 support level, which will send the Bitcoin price tumbling to as low as $6,000.
  • This according to Florian Grummes, Managing Director at Midas Touch Consulting.
    • He said, “At some point I expect that this $18K support level will break, and then we could actually lose quickly another 30, 40, or 50 percent,”.
    • Adding, “It would be the worst case that we go down to $6K.
      Over the year, Bitcoin‘s price has fallen by 60 percent, and Ethereum has dropped by 65 percent.

      • He did however say, that recovery will occur in 2023, and that 2024 could be “the start of a new bull market” as Bitcoin Halving occurs. Kitco metals / crypto interview.

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