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Morning NOTE

GOOD MORNING

The ZAR weakened aggressively to 19.49000, and trading close to its records of the previous week.  

OPENING RATES

• USDZAR : 19.2800
• EURZAR : 20.7700
• GBPZAR : 23.9100

SOUTH AFRICA

• SA TO PURCHASE EMERGENCY POWER TO KEEP THE LIGHTS ON
  • The Deputy President’s, Paul Mashatile, announcement follows Eskom’s warning that South Africans should brace for the toughest winter yet, as power cuts were likely to hit Stage 8.
    • Mashatile assured South Africans that government was determined to bring an end to load shedding.
    • Mashatile’s statement followed the battling power utility’s warning that South Africans should brace for the toughest winter yet, as power cuts were expected to hit Stage 8.
    • Eskom further said its shortfall of generation capacity could be a reality until August.
    • Mashatile was speaking during an oversight visit to an agriculture institution in KwaZulu-Natal on Thursday. EWN

POWER SHIPS

• Electricity Minister Kgosientsho Ramokgopa has emphasised that power ships will inevitably form part of the country’s emergency energy procurement.
  • Ramokgopa addressed the closing session of the Enlit Africa Energy Conference at the Cape Town International Convention Centre on Thursday afternoon.
  •  Electricity Minister Kgosientsho Ramokgopa has emphasised that power ships will inevitably form part of the country’s emergency energy procurement.
  • Ramokgopa addressed the closing session of the Enlit Africa Energy Conference at the Cape Town International Convention Centre on Thursday afternoon.
     
• Karpowership, the Turkish company seeking to supply electricity to South Africa, secured government permission to moor its ship-mounted power plants at three of the country’s harbours.
  • A dispute with the port operator may delay or thwart one of the projects.
  • Karpowership has secured government permission to moor its ship-mounted power plants at three of the country’s harbours.
  • A notice granting the consent was issued by the Department of Transport in February, though it wasn’t initially publicly disclosed.
  • Karpowership’s plans, which were initially supposed to be implemented by August last year, have also been slowed by lawsuits and challenges from environmentalists.

GLOBAL MARKETS

Stocks

• On Thursday, the S&P 500 climbed 0.94% and the Nasdaq Composite jumped 1.21%, with both benchmarks hitting their highest levels since August,
  • while the Dow rose 0.34%. Seven out of the 11 S&P sectors finished higher, led to the upside by technology, communication services and consumer discretionary.
  • Investors continued to monitor negotiations on the US debt ceiling, with House Speaker Kevin McCarthy suggesting a potential deal could come as soon as next week.
  • Positive corporate updates from major firms also boosted sentiment, with Nvidia surging nearly 5% after announcing it joined ServiceNow to build AI for enterprises.
     
• US stock futures edged higher on Friday after the major averages gained during Thursday’s regular session.
  • Investors confident  as easing concerns about the US debt ceiling crisis and upbeat corporate earnings results lifted market sentiment.
  • Dow and S&P 500 futures rose about 0.1%, while Nasdaq 100 futures advanced 0.3%.

Bonds

• US 10 Year treasury Yield was 3.64 % on Friday May 19, according to OTC interbank yield quotes for the  government bond maturity.
  • Yields continue to rise on the monetary policy front,
  • After earlier hawkish comments earlier in the week;
  • TWO MORE US Fed officials said on Thursday that US inflation does not look like it is cooling fast enough to allow the central bank to pause its interest rate hikes.
  • Markets are now pricing in about a 40% chance that the Fed would deliver another 25 basis point rate hike next month.

Yesterday

• DOW +115 TO 33,535
• SP500 +39 TO 4,198
• NASDAQ +188 TO 12,688 (CASH)

Equity futures
  image: Trading economics

OVERNIGHT HEADLINES

The US dollar

• The US dollar index held its recent advance to around 103.5 on Friday, hovering at its highest levels in two months,
  • underpinned by growing optimism over the debt ceiling negotiations and hawkish signals from the Federal Reserve.
    • The dollar gauge is also up about 0.8% so far this week, on track to gain for the second consecutive week.
  • Meanwhile, strong US jobs data pointing to a still-tight labour market bolstered the Fed’s case to keep monetary settings restrictive.
    • Two Fed officials said on Thursday that US inflation does not look like it is cooling fast enough to allow the central bank to pause its interest rate hikes.
    • Markets are now pricing in about a 40% chance that the Fed would deliver another 25 basis point rate hike next month.
    • THIS WILL BE DOLLAR SUPPORTIVE – FX NEWS

Asian markets higher following another strong performance on WallStreet.

• In Japan, the Nikkei 225 Index 0.77% to close at 30,808 and the benchmark reaching its highest levels since August 1990 as strong domestic earnings and a weak yen boosted the outlook for Japanese stocks.
  • Local shares also tracked gains on Wall Street overnight as progress on debt ceiling negotiations and upbeat corporate updates in the US lifted market sentiment.
    • Moreover, investors digested data showing Japan’s core inflation accelerated again in April, challenging the Bank of Japan’s view inflation will slow back below its target later this year as cost pressures dissipate.
    • Technology stocks led the charge.
• In China, the Shanghai Composite fell 0.7% to below 3,280, giving up gains from earlier in the week, with nearly all sectors participating in the decline.
  • Investors continued to assess the strength of China’s post-pandemic recovery after a series of economic data pointed to a challenging recovery path.
  • Financial and industrial stocks led the market lower. REUTERS

Crude oil

• US WTI crude OIL steadied around $72/bl on Friday and were set to finish the week higher.
  • Prices were supported by a solid demand outlook and various supply-side disruptions.
  • Global oil demand is expected to exceed supply by 2 million barrels per day in the second part of 2023 with China accounting for a substantial part of it, an IEA projection showed.
  • The US government also announced earlier this week that it would purchase up to 3 million barrels of crude oil to replenish its depleted Strategic Petroleum Reserve, with deliveries planned for August.
  • On the supply-side, wildfires in major oil-producing regions in Canada and the seizure of oil tankers by Iran threatened to disrupt flows. GULF ENERGY NEWS

Gold

• Gold  continued its recent decline to $1,960 /oz in the face of a Dollar onslaught .
  • Bullion  was on track to lose more than 2% this week, as growing optimism over the US debt ceiling negotiations and hawkish signals from the Federal Reserve weighed on the metal.
  • US President Joe Biden and House Speaker Kevin McCarthy indicated confidence that a US default would be averted,
    • with McCarthy suggesting a potential deal to raise the US debt ceiling could come as soon as next week.
  • On the monetary policy front, two US Fed officials said on Thursday that US inflation does not look like it is cooling fast enough to allow the central bank to pause its interest rate hikes.
  • Markets are now pricing in about a 40% chance that the Fed would deliver another 25 basis point rate hike next month.
  • Gold is highly sensitive to the rates outlook as higher interest rates raise the opportunity cost of holding non-yielding bullion, making its less attractive for investors. Kitco metals