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Morning NOTE

GOOD MORNING

The ZAR strengthened as Risk appetite returned to markets ahead of the US FOMC minutes.

OPENING RATES

• USDZAR 17.2300
• EURZAR 17.8200
• GBPZAR 20.4900

SOUTH AFRICA

• President Cyril Ramaphosa and former Health Minister Zweli Mkhize have been nominated as the top two candidates to stand for the position of African National Congress (ANC) president.
  • Kgalema Motlanthe, the ANC’s electoral committee head, said Ramaphosa received 2,037 nominations while Mkhize received 916.
  • Motlanthe announced the candidates vying for the top six positions in the ANC’s national executive committee. EWN

Malema back in court

• The South African Human Rights Commission (SAHRC) will take Economic Freedom Fighters (EFF) leader Julius Malema to the Equality Court on Words.
  • The commission wants to make an urgent application for an interdict regarding comments that Malema made at the EFF’s Western Cape people’s assembly.
  • The commission hoped Malema would retract his statements that it said constituted incitement of violence and hate speech. News24

Grey listing

• Finance Minister Enoch Godongwana said the government still has more hoops to avoid being greylisted by the Financial Action Task Force (FATF).
  • Greylisting would impact South Africa’s ability to trade internationally.
    • On Tuesday, the National Assembly passed a bill that aims to combat money laundering and terrorism financing.
    • But the bill has not been supported by the majority of opposition parties, which complained that it’s ill-conceived and too rushed.
    • He said, “Avoiding potential greylisting is not the responsibility of a single department or government. It is a collective responsibility.” EWN

GLOBAL MARKETS

Stocks:

• US stock futures were little changed on Wednesday as investors braced for the latest Federal Reserve meeting minutes that could guide the US rates outlook.
  • On Tuesday, the Dow rose 1.18%, while the S&P 500 and Nasdaq both jumped 1.36%.
    • Those moves came as upbeat corporate earnings and bets for a less aggressive tightening from the Fed underpinned equities.
  • Investors now look ahead to the Fed meeting minutes for clues on the central bank’s tightening plans.
    • US markets will be closed on Thursday for the Thanksgiving holiday and will close early on Friday.

Bonds:

• The yield on the US 10-year traded at 3.76% .
  • It was below 4.2% touched early in the month, as traders await the FOMC minutes release on Wednesday for more clues on the Fed’s next rate hikes.
  • Fed policymakers have been trying to push against the dovish narrative from markets, with many officials signalling rates would go higher than projected in September.

Ahead of the minutes recall;

• The Fed raised the target range for the federal funds rate by 75bps to 4% during its November 2022 meeting.
  • It was the 6th consecutive rate hike and the 4th straight three-quarter point increase, pushing borrowing costs to a new high since 2008.
    • The decision came in line with market forecasts.
    • Policymakers also said that ongoing increases in the target range will be appropriate because the cumulative effect  lags economic activity and inflation by approximately 18 months.
    • The message could signal a smaller rate hike in December ,
      • but during the press conference Chair Powell also noted the ultimate level of interest rates will be higher than previously expected.
• The Fed aims to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2%, which remains elevated around 40-year highs. source: Federal Reserve

YESTERDAY

• The Dow added 397 to 34,098
• The SP500 added 53 to 4,003
• The Nasdaq  gained 149 to 11,174

•  Image: Trading Economics
   

OVERNIGHT HEADLINES

Asian markets trading sharply higher on the back of a stronger close on Wallstreet.

• In Japan, the Nikkei 225 climbed 0.61% to 28,116, extending gains from the previous session, with nearly all sectors finishing in positive territory.
  • However,  investors remain cautious ahead of US Federal Reserve meeting minutes that could offer clues on the trajectory of US rate hikes, while also monitoring the Covid situation in China.
  • Strong gains were seen from automakers, healthcare and commodity-linked firms such as Toyota Motor (2.4%).
     
• In China, the Shanghai index rose 0.26% to close at 3,097, but most mainland stocks remained under pressure as major Chinese cities imposed some movement restrictions to arrest fresh Covid outbreaks.
  • In the latest developments, Shanghai will order people traveling into the city to avoid public places.
  • This would include restaurants, malls and markets starting from Thursday to prevent a nationwide Covid surge from hitting the city.
     

The US dollar steadied around 107 on Wednesday, holding a recent decline as investors cautiously awaited the latest Federal Reserve meeting minutes that could offer clues on the central bank’s future tightening plans.

• Traders have been analyzing remarks from Fed officials who have largely maintained a strong commitment to bring down inflation,
  • but voiced support for a slower pace of interest rate hikes if warranted. I
• Investors also look ahead to a slew of US economic reports including jobless claims, durable goods and new home sales data.
   

US WTI crude oil  rose above $81/BL, extending gains from the previous session as supply-side uncertainties overshadowed demand concerns.

• Investors awaited further details on G7 plans to cap Russian oil and worried about how Russia would respond after it previously stated that it won’t sell crude to countries that adopt such measures.
• In the US, industry data showed that US crude inventories dropped by 4.2 million barrels last week, much higher than forecasts for a 2.2 million barrel draw.
  The US oil benchmark was also lifted after the UAE, Kuwait, Iraq and Algeria backed claims by Saudi Arabia’s energy minister that OPEC+ was not considering increasing output.  Gulf Energy news
   

Gold recovered to $1740/oz after falling to near $1,730 /oz, its weakest levels in two weeks as investors cautiously awaited the latest Federal Reserve meeting minutes that could guide the outlook for future US rate hikes.

• Traders have been parsing through remarks from Fed officials who have largely maintained a strong commitment to bring down inflation
  • , but voiced support for a slower pace of interest rate hikes if warranted.
• In the latest commentary, San Francisco Fed President Mary Daly warned against overtightening,
  • while Cleveland Fed President Loretta Mester said she wants to see inflation come down sustainably before supporting a pause.

Gold remains highly sensitive to the rates outlook as higher interest rates raise the opportunity cost of holding non-yielding bullion, denting its appeal. Kitco metals