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Morning NOTE

GOOD MORNING

The ZAR retreated after the SARB left rates unchanged and also US Jobless claims surprised markets lower.

OPENING RATES

• USDZAR : 17.8700
• EURZAR : 19.9500
• GBPZAR : 23.0600

SOUTH AFRICA

SA interest rates

• The SARB MPC left rates unchanged with the MPC citing future risk to inflation remains.
  • The fight against inflation is not over yet – those were the sentiments of South African Reserve Bank (Sarb) Governor Lesetja Kganyago.
  • He said it at the conclusion of the bank’s rate-setting meeting on Thursday, in a sign that the bank’s monetary policy stance remains tight.
  • “The fight is still on, we are ready to deploy our tools to tackle this monster that is eating the income of South Africans,” he said. Source Moneyweb

Joburg Gas explosion

• The COJ used the services of structural and civil engineers to look into the safety and integrity of the residential buildings in the area.
  • The buildings near the Bree Street gas explosion site in central Johannesburg have been deemed safe for occupation.
  • City manager Floyd Brink said the structural integrity of the buildings remained intact.
  • He said that people won’t have to be evacuated from residential buildings. Source EWN

Zuma in Russia

• Former president Jacob Zuma has extended his trip to Moscow as the Department of Correctional Services (DCS) decides whether he should return to prison.
  • News24 understands from two sources who have knowledge of Zuma’s trip that he was meant to return on Tuesday, but that he extended the trip.
  • He is seeking medical treatment in the Russian capital, although the details of his illness are unknown.
  • The DCS said on Wednesday that the department was yet to decide on Zuma’s fate. Source  News24

GLOBAL MARKETS

Stocks
Stocks mixed after mixed earnings reports.

• On Thursday, the Dow gained 0.47% amid an earnings-driven rally in Johnson & Johnson and Goldman Sachs, pushing the benchmark index to its ninth winning session.
   
• However both the S&P 500 and Nasdaq Composite tumbled 0.68% and 2.05%, respectively, weighed down by sharp losses in Tesla and Netflix amid weak quarterly results.
  • Investors also rotated out of high-flying technology names into more cyclical stocks.
  • US stock futures steadied on Friday after the major averages ended mixed during Thursday’s regular session.
  • Futures contracts tied to the three major indexes were all trading near breakeven.

Bonds
Bond yields higher after US jobless claims printed less than expected

• US 10 Year Note Bond Yield was 3.84 percent on Friday July 21, according to over-the-counter interbank yield quotes for this government bond maturity.
• The benchmark yield spiking 10 bps.
• The number of Americans filing for unemployment benefits fell by 9,000 from the prior week to 228,000 on the week ending July 15th, the lowest in two months, and sharply below market expectations of 242,000.
• The result further underscored the stubborn tightness in the US labour market, consolidating Federal Reserve officials’ calls for another 25bps rate hike in its upcoming meeting. source: U.S. Department of Labour

Yesterday’s close

• DOW +163 to 35,225
• SP500 -30 to 4,534
• NASDAQ  -294 to 14,063

Futures open

OVERNIGHT HEADLINES

Asian markets

Eastern markets lower following a large sell-off on Wall Street.

• In Japan, the annual Inflation rate printed below estimates
  The annual inflation rate in Japan edged up to 3.3% in June 2023 from 3.2% in May but less than market forecasts of 3.5%.
  • Core inflation also ticked higher to 3.3% from 3.2% in May, matching expectations and staying outside the Bank of Japan’s 2% target for the 15th month.
  • The benchmark Nikkei 225 Index fell 0.5% to below 32,400, extending losses from the previous session.
  • Investors digesting data showing Japan’s annual headline and core inflation rates accelerated slightly in June.
  • Investors now look ahead to the Bank of Japan’s policy decision next week, where it is expected to maintain ultra-low interest rates.
  • Technology stocks led the decline following similar moves on Wall Street overnight . Source Reuters

Energy
Oil prices set to advance on the back of more stimulus from China.

• Brent crude futures traded above $80/bl barrel on Friday and were set to end the week slightly higher, while investors continued to assess the outlook for the oil market in the second half of the year.
  • Oil prices found support earlier this week after China’s top economic planner pledged to roll out policies to “restore and expand” consumption in the world’s top crude importer.
• On the supply side, Russia’s energy ministry said the country will cut oil exports by 2.1 million tons in the third quarter, in line with planned voluntary export cuts of 500,000 barrels per day in August.
  • Expectations that the end of the current monetary policy tightening cycle is getting closer also added to bullish sentiment.
• Slowing down the advance were data indicating that US crude inventories declined by 708,000 barrels last week.
  • It was lower than market expectations for a larger 2.4 million barrel drop. Source : Gulf News

Metals

Precious metals retreating after a rebound in US yields.

• Gold steadied around $1,970/oz on Friday and was set to gain for the third consecutive week.
  • Traders citing easing US inflation raised hopes that the Federal Reserve is close to the end of its current monetary policy tightening cycle.
  • Still, the US central bank is widely expected to raise interest rates by 25 basis points this month, while traders scaled back bets of further rate increases this year.
  • Investors also look ahead to interest rate decisions from the European Central Bank and the Bank of Japan next week.
    • Elsewhere, softer-than-expected UK inflation lowered bets on further rate hikes from the Bank of England. Source : Kitco

Currencies

• The Dollar rebounded after US weekly jobless claims indicated a strong jobs market
• The US dollar steadied above the 100 mark on Friday and was set to gain nearly 1% this week in a likely technical bounce.
  • Investors assess more US data to guide the outlook for Federal Reserve monetary policy.
  • Latest data showed that weekly jobless claims in the US fell to a two-month low last week, indicating robust demand for workers, while continuing claims rose the most in over three months.
  • The data cemented expectations that the Fed would hike rates by 25 basis points next week.
• Investors also look ahead to interest rate decisions from the European Central Bank and the Bank of Japan next week.
• The dollar is set to gain the most this week against the sterling as softer-than-expected UK inflation lowered bets on further rate hikes from the Bank of England. Source : PoundSterlinglive