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Morning NOTE

GOOD MORNING

The traded in a wide range from 17.7900 to 17.4400 before and post the SARB MPC rate decision.

OPENING RATES

• USDZAR 17.6000
• EURZAR 17.3100
• GBPZAR 19.7900

SOUTH AFRICA   

• Minister of Energy Mineral Resources Gwede Mantashe said he was not responsible for the country’s energy crisis.
  • Mantashe’s comments come on the back of calls for him to be axed after Eskom implemented stage 6 power cuts last week.
    • Mantashe faced criticism over the rampant planned power cuts.
    • Speaking at the signing of power purchase agreements in Centurion on Thursday, Mantashe hit out at critics.
  • Mantashe refused to take the fall for the country’s continued electricity woes. Source : EWN
• The ANC protected Ramaphosa,  in Parliament after it staved off an attempt by the opposition to debate the Phala Phala farm saga on Thursday – at least for now.
  • The DA submitted its motion last week, calling for the establishment of an ad hoc committee to investigate matters related to the burglary on the president’s farm.
  • But at the eleventh hour, the ANC has now put a stop to the debate.  IOL
• Not everyone was in lockstep with the SARB’s rate hike decision.
  • Various unions have hit out at the SARB’s decision to hike interest rates, accusing the central bank of choking small businesses.
    • The bank hiked interest rates by 75 basis points in a bid to fight stubborn inflation.
  • SAFTU spokesperson Trevor Shaku said that he did not believe that the decision was made in the best interests of the economy.
    • “It is regressive and sabotages the economy further in the context of low growth,” Shaku said.
    • Shaku said that higher mortgage costs could drive small and medium businesses to default on payments. News24

GLOBAL MARKETS

Stocks:

• On Thursday, stocks continued its decline as the major averages extended losses on Thursday, with the Dow losing 0.35%, while the S&P 500 and Nasdaq Composite declined 0.84% and 1.37%, respectively.
• US stock futures fell on Friday, with the major averages on track to decline for the second straight week as investors worried about the falling odds of a soft economic landing.
  • The Federal Reserve remains intent on bringing down inflation with aggressive interest rate hikes. Futures contracts tied to the three major indexes were all in negative territory.
• In extended trading, Costco dropped nearly 3% after reporting higher labour and freight costs, while DocuSign and Guidewire rose on positive corporate updates.
  • Consumer discretionary, financials and industrials were hit by recession fears, while defensive stocks outperformed.
• All three benchmarks are headed for their second straight losing week and are all down at least 2% so far during the period.

Bonds:

• The US 10-year yield broke above the 3.7% for the first time since February 2011 as expectations of higher interest rates dented appetite for government debt.
  • The FOMC hiked interest rates for a third consecutive meeting on Wednesday while pledging to continue increasing rates as high as 4.6% in 2023 until inflation is under control.
  • Policymakers also significantly cut their outlook for 2022 economic growth, expecting just a 0.2% gain in GDP, down from 1.7% in June.
  • Meantime, the 2-year Treasury yield surged above 4.1%, the highest since 2007, widening the gap in the former and further inverting the yield curve.

• **NB:  INVERTED yield curves have been reliable indicators of past US recessions.

YESTERDAY

• The Dow fell 107 to 30,076
• The Sp500 fell 31 to 3,757
• The Nasdaq  fell 153 to 11,066

• Image: Trading Economics

OVERNIGHT HEADLINES

• Asian markets lower across the region following another weaker session on Wall Street.

  • In Japan, the Nikkei 225 fell 0.58% to close at 27,154, hitting their lowest levels in over two months and tracking losses on Wall Street.
    • The US Federal Reserve delivered another large interest rate hike and signalled further increases ahead.
      • The BOJ intervening in the FX market to try and stop a rapidly declining YEN, even though it continues to run with its ultra-low monetary policy.
      • Investors also digested the Bank of Japan’s policy decision after it maintained ultra-low interest rates and remained dovish in its outlook.
    • The BOJ defying a global wave of policy tightening and risking further yen depreciation and capital outflows. Reuters
       
• The US dollar traded at 111.50  near a 20-year high, underpinned by expectations that the Federal Reserve will remain aggressive in fighting inflation even at the risk of a recession.
  • The Fed raised interest rates by 75 basis points for a 3rd time in a row on Wednesday and projected rates to peak at 4.6% next year with no cuts until 2024.
  • The news defying market speculations that the central bank could ease policy in 2023 to better manage the economy.
  • The dollar also benefited from safe-haven flows amid escalating geopolitical tensions surrounding Ukraine and growing fears about a global economic slowdown.
  • Meanwhile, the dollar weakened against the yen after Japanese authorities intervened in the currency markets for the first time since 1998. FX news
     
• Crude oil WTI prices  traded near $83 /bl and were on track for its fourth straight losing week.
  • Demand concerns continue to weigh on prices, as central banks around the world raised interest rates further this week.
  • The US Federal Reserve led the charge with its third straight 75 basis point rate hike and a strong dollar rally driven by the Fed’s aggressive stance against inflation and safe-haven demand also dented sentiment.
  • Meanwhile, oil prices were kept from further losses on Friday following reports that efforts to revive the 2015 Iran nuclear deal have stalled.
  • Investors also monitored Russia’s partial military mobilization that could disrupt supply further, rebounding Chinese demand and the possibility of more output cuts from OPEC+. Gulf Energy News
     
• Gold prices continued to fall as it traded near two-year lows around $1,670/oz.
  • Bullion remaining under pressure from a strong dollar and surging Treasury yields that reflected expectations for tighter monetary policy and slowing global growth.
  • The US Federal Reserve led a raft of central bank rate hikes this week, delivering its third straight 75 basis point rate increase to bring down inflation.
  • In the face of concentrated efforts to bring down inflation and major central banks all hiking rates, Gold has lost its shine as the Dollar replaced it as the “safe-haven asset of choice” .  Kitco Metals