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Morning NOTE

GOOD MORNING

The ZAR retreated on the back of a Dovish SARB and better US jobs report.

OPENING RATES

• USDZAR : 17.9800
• EURZAR : 20.000
• GBPZAR : 23.1200

SOUTH AFRICA

VIP PROTECTION UNITS IN COURT

• Eight VIP presidential protection police officers who were caught on video assaulting two civilians earlier this month are set to appear in court on Monday.
• The men – who form part of Deputy President Paul Mashatile’s security detail – handed themselves over to the police in Sandton on Sunday.
• They are charged for pointing a firearm, assault and malicious damage to property.
• Monday’s court appearance is expected to be brief, and it is the first one. Source EWN

EARTHQUAKES

• ANOTHER EARTHQUAKE RATTLES PARTS OF JOBURG
• The Council for Geoscience confirmed that just before 7 pm on Saturday, an earthquake with a local magnitude of 2.98 was recorded in the southern suburbs.
• The epicentre located about two kilometres south of Harmony Doornkop Gold Mine. Source EWNB

EXPLOSION

• Also, despite claims from the Joburg mayor, City power has not yet restored power to the site of the explosion.
  • City Power and Johannesburg Water said they would not restore supply to the area affected by the explosion on Bree Street that damaged infrastructure, until the city declared it safe.
  • Johannesburg Emergency Management Services (EMS) have deployed water tankers and portable toilets to some areas in the city’s CBD that were affected by the gas explosion.
  • On Wednesday evening, an underground gas explosion tore through parts of Bree Street in the inner city, near the Bree taxi rank.
  • One person died while at least 45 people were injured. Source moneyweb  

GLOBAL MARKETS

Stocks
Stocks flatlining in early trading ahead of the FOMC on Wednesday.

• US stock futures held steady on Monday as investors look ahead to the Federal Reserve’s interest rates decision and a fresh batch of corporate earnings reports this week.
  • Futures contracts tied to the three major indexes were all trading near breakeven.
     
• Last week, the Dow and S&P 500 gained 2.08% and 0.69%, respectively, while the Nasdaq Composite lost 0.57%.
  • Those moves came as investors rotated out of mega-cap technology names into more cyclical stocks including energy, financials and healthcare.
  • Investors also reacted to mostly positive earnings results last week, while easing US inflation that lowered the odds of further monetary tightening this year continued to buoy sentiment.
  • Still, the Fed is widely expected to raise rates by a quarter point when it meets on Wednesday, with traders zeroing in on Fed Chair Jerome Powell’s comments after the announcement for guidance.
  • This week also marks the busiest period of the earnings season. Source : Trading economics

Bonds
Bonds yields higher ahead of the FED after strong jobs data.

• The yield on the US 10-year Treasury note hovered around 3.85% on the last day of the week.
  • Traders digest further signs of labour market strength and brace for the FOMC monetary policy decision next week.
  • A 25bps hike in the fed funds rate is fully priced in, although investors remain divided on the need for further increases.
  • The chances for another quarter point rise currently stand at 16% for September and 30% for November.
     
• Meanwhile, the yield on the US two-year note, the most sensitive to short-term policy moves, edged higher to 4.85%.
  • Economic data released this week showed initial claims unexpectedly fell to a two-month low of 228K.
  • On the other hand, retail sales, industrial production, housing starts and building permits disappointed. Source : Reuters

Friday’s close

• DOW +2 to 35,227
• SP500 +1.47 to 4,536
• NASDAQ -30 to 14,032

Futures open

OVERNIGHT HEADLINES

Asian markets

Eastern markets trading mixed ahead of this week key Fed rate decision.

• In Japan, the Nikkei 225 Index jumped 1.3% to above 32,700, snapping a two-day decline.
  • Investors also digested data showing Japanese manufacturing activity contracted further in July, while services activity slowed.
  • Gains among commodity-linked stocks were led by Nippon Steel (2.1%), Kobe Steel (2.7%).
     
• In Australia, the ASX 200 Index rose 0.2% to above 7,320 on Monday, recouping losses from the previous session, with energy stocks leading the charge amid stronger oil prices.
  • Investors also digested data showing Australian manufacturing and services activities contracted in July, while awaiting second-quarter inflation data due on Wednesday.
  • Gains in the energy sector were led by Woodside Energy (1%). Source:  Reuters

Energy
Oil prices remain supported ahead of this week’s FOMC rates decision.

• Brent crude futures remained around $81/bl on Monday, pausing a recent rally as investors turned cautious ahead of key interest rate decisions.
  • Both the FED and ECB are expected to move on rates this week.
  • Both central banks are widely expected to lift rates again this month, though traders scaled back bets on further monetary tightening this year amid easing inflation.
     
• However, supply continues to dominate the landscape and oil prices remain close to their highest levels in three months on tighter global supply and stronger Chinese demand boosted the outlook.
  • United Arab Emirates Energy Minister Suhail al-Mazrouei said on Friday that actions by OPEC+ to support the oil market are sufficient for now, and that the group is ready to take further action if needed.
  • Elsewhere, an escalating conflict in Ukraine after Russia withdrew from a grain exports agreement also gripped commodity markets. Source : Gulf news

Metals
Precious metals off its high’s ahead of the FOMC this week.

• Gold steadied around $1,960 /oz on Monday as investors braced for interest rate decisions from major central banks this week.
  • The US Federal Reserve is widely expected to raise interest rates by 25 basis points on Wednesday.
  • The European Central Bank is also seen lifting rates by another quarter-point on Thursday, while the Bank of Japan will likely keep its policy of ultra-low interest rates unchanged on Friday.
  • Moreover, markets look ahead to the Fed-preferred PCE inflation gauge and advance estimate of Q2 GDP growth in the US this week.
  • Gold continues to trade inversely to the US dollar due to cost of carry and the yield benefits of owning the Dollar. Source : Kitco

Currencies

• The US dollar index steadied around the 101 mark on Monday as traders avoided making big bets ahead of the US Federal Reserve’s key policy decision this week.
  • The Fed is widely expected to raise interest rates by 25 basis points on Wednesday.
• BUT  traders will listen closely to Fed Chair Jerome Powell’s comments after the meeting for clues on the central bank’s next steps.
  • Meanwhile, investors have been scaling back bets of further policy tightening after July, with market pricing suggesting possible rate cuts next year amid easing US inflation.
  • Markets also look ahead to the Fed-preferred PCE inflation gauge and advance estimate of Q2 GDP growth in the US this week.
  • Elsewhere, the European Central Bank and the Bank of Japan are set to decide on monetary policy this week as well. Source : Forexnews