View this email in your browser

Morning NOTE

GOOD MORNING

The ZAR continued its recent gains following the dovish comments from the FED,  as it battles the double edged sword of inflation and a Banking crises.

OPENING RATES

• USDZAR 18.0900
• EURZAR 19.5900
• GBPZAR 22.2300

SOUTH AFRICA

• The ANC  objected to the establishment of an ad hoc committee to investigate widespread corruption and criminal cartels at Eskom.
  • The ANC objected to the DA’s motion for the ad hoc committee,
    • as well as the Economic Freedom Fighters (EFF)’s amendment to the same motion to include investigating coal and evergreen contracts.
  • The DA’s motion came before the National Assembly (NA) on Thursday where the majority of the members of Parliament (MPs) voted against it.
  • This was a day after the National Assembly rejected another motion for a similar inquiry into the Phala Phala saga. EWN
     
• Fuel price relief likely in April as rand firms
  • The rand firmed further against the US dollar on Thursday night, edging close to the psychological R18 mark and fuelling expectations of fuel price cuts in April.
  • It traded over 1% stronger, at around R18.07 to the greenback, buoyed by the US Federal Reserve raising interest rates by 25 basis points on Wednesday.
  • If the rand stays at current levels or strengthens further by the end of March,
    • fuel prices are expected to ease across the board in April, according to the Automobile Association of South Africa (AA). Moneyweb

GLOBAL MARKETS

Stocks:

• In regular trading on Thursday, the major averages rallied sharply at the open as investors piled into technology stocks on bets that the Federal Reserve would soon pause its tightening campaign,
  • before giving back most of the gains on lingering concerns over the banking sector.
• US stock futures were little changed on Friday after the major averages faced heightened volatility during Thursday’s regular session.
  • Investors continue to grapple with tightening monetary conditions and an ongoing banking crisis.
  • Futures contracts tied to the three major indexes drifted between small gains and losses.
• Those moves came even after Treasury Secretary Janet Yellen said authorities are prepared to take more action if needed to stabilize US banks.
  • Investors now look ahead to US durable goods, manufacturing and services data on Friday, as well as St. Louis Fed President James Bullard’s speech.

Bonds:

• The yield on the US 10-year declined below the 3.5% level.
  • The yield fast approaching the six-month low of 3.3% touched on Monday.
  • Investors digested the dovish rhetoric from the Federal Reserve along with the loosely-expected 25bps hike in its funds rate.
  • The Fed indicated that it was on the verge of pausing its tightening campaign to address recent risks to financial stability,
    • as bank failures this month threatened the health of systemic banks.
  • Concerns that high interest rates may increase the risk of a crisis drove the FOMC to keep year-end forecasts of the funds rate unchanged at 5.1%.
    • Also, the yield on the 2-year note fell 20bps to under 4%, narrowing the inversion on the yield curve. 

Yesterday

• The Dow added 75 to 32,105
• The SP500 gained 11 to 3,948
• The Nasdaq added 117 to 11,787

 image: Trading economics

OVERNIGHT HEADLINES

The US dollar

• The dollar index steadied around 102.6 on Friday.
  • Investors still assessing the outlook for Federal Reserve monetary policy as the central bank aims to balance the fight against inflation with lingering concerns about the banking crisis.
  • Earlier this week, the Fed delivered a widely expected 25 basis point rate hike and hinted at only one more rate increase.
    • Fed Chair Jerome Powell said that officials don’t see rate cuts this year and are prepared to prolong their tightening cycle if needed.
    • Markets are however pricing in cuts later in the year given the slow down in inflation and banking crises.
  • Investors now look ahead to US durable goods, manufacturing and services data on Friday, as well as St. Louis Fed President James Bullard’s speech.
    • The dollar index is on track to lose more than 1% this week. FX NEWS

Asian markets mixed following comments from Treasury secretary Janet Yellen, as well as the Fed’s dovish pivot.

• In Japan, the Nikkei 225 fell 0.13% to close at 27,385, sliding for the second straight session.
  • Investors also reacted to data showing Japan’s annual inflation rate retreated sharply from 41-year highs.
    • The latest readings reflecting easing global inflationary pressures and slowing economic activity worldwide.
    • Investors also digested data pointing to further improvement in Japanese manufacturing and services activities for March.
  • Meanwhile, investors continued to grapple with tightening global monetary conditions and an ongoing banking crisis.
    • Financial stocks led the decline, with losses from Mitsubishi UFJ (-1.1%), Sumitomo Mitsui (-0.5%) and Mizuho Financial (-0.8%).
    • Other index heavyweights also slumped, including Fast Retailing (-1%), Nippon Steel (-0.7%) and Toyota Motor (-0.2%). Reuters

Crude oil

• US WTI crude futures edged below $70/BL on Friday as US Energy Secretary Jennifer Granholm told lawmakers that it will be “difficult” to refill strategic oil reserves this year.
  • This created speculations that the US government would only start buying at even lower prices.
  • Signs of robust crude supply from Russia also weighed on prices,
    • as the previously announced cut in the country’s oil production would come from a higher base of output than initially indicated.
    • Moreover, the global banking sector remains mired in uncertainties even after Treasury Secretary Janet Yellen
      • said authorities are prepared to take more action if needed to stabilize US banks, prompting investors to avoid risk assets.
    • Still, the US oil benchmark is on track to finish the week higher.
• Traders citing bets that the Federal Reserve will soon end its tightening campaign and optimism over China’s demand recovery. Gulf Energy News

Gold

• Gold prices rose to approach $2,000 /oz settling at $1987//oz, the highest in one year.
  • Investors continued to digest the Federal Reserve’s March meeting and risks to the global banking system.
  • The US central bank raised its funds rate by 25bps, as widely expected, but struck a dovish tone in its policy report and Summary of Economic Projections.
  • Gold is highly sensitive to the rates outlook as lower interest rates reduce the opportunity cost of holding non-yielding bullion.
  • Precious metal prices were also supported by a fresh flight to safety ;
    • This after Treasury Secretary Yellen told lawmakers the US government was not considering a “blanket insurance” for bank deposits,
    • The statement sent markets lower and reignited concerns about the financial crisis. Kitco metals report