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Morning NOTE

GOOD MORNING

The ZAR continued to weaken on the back of Hawkish comments and actions from major central banks last week.

OPENING RATES

• USDZAR : 18.700
• EURZAR : 20.4000
• GBPZAR : 23.8200

SOUTH AFRICA

Eskom

• Eskom on Sunday said there was an improvement in its power generation capacity and breakdown performance at its major stations.
  • In a media briefing, Eskom officials revealed that the breakdown performance improved by almost 3,000 megawatts in the last month.
  • The power utility’s energy availability factor is also sitting at 60 percent, a level it has not reached since August last year. Source : EWN

Water crises

• The national health department has confirmed a rise in the cholera death toll, to 43.
  • The department said Gauteng accounts for most of the deaths, with 35 people confirmed to have died from cholera in the province.
    • It said there are currently 197 confirmed cases of the waterborne disease in the country.
    • Despite this, the department said there has been a decline in the total number of infections.
    • “Gauteng province accounts for most of the cases at 89% with 176 reported from three districts. Source : EWN

SA RESERVE BANK

• SARB governor, Kganyago, said more rate hikes are needed to tame inflation.
• The central bank’s monetary policy committee has raised the benchmark rate at its 10 past meetings with the aim of bringing inflation back to the 4.5% midpoint.
• He said the SARB will increase borrowing costs to tame sticky inflation, even if its actions gave rise to financial distress, Governor Lesetja Kganyago said. Source eNCA

GLOBAL MARKETS

Stocks
Equities mixed at the start of the week following last week’s central bank actions and the failed Russian Coup.

• US stock futures edged higher on Monday to start the final trading week of June, as investors looked for fresh catalysts in the market.
  • Futures contracts tied to the three major indexes were all up at least 0.2%.
  • Last week, the Nasdaq Composite dropped 1.44% to break an eight-week winning streak, while the Dow and S&P 500 lost 1.67% and 1.01%, respectively.
     
• Investors also continued to assess the economic and monetary policy outlook, with Jerome Powell indicating  further interest rate increases if high inflation persists.
  • Meanwhile, markets will keep an eye on Europe, where Russia faced a brief rebellion by a private military group over the weekend.

Bonds
Yields remain higher on government dent following last week’s ultra-hawkish central bank actions.

In the USA

• US 10 Year Note Bond Yield was 3.73 % on Monday June 26, according to over-the-counter interbank yield quotes for this government bond maturity.
  • Investors are expecting the interest rates to rise further and remain elevated for longer.
  • Fed Chair Powell reinforced last week’s message that interest rates will need to rise further this year to fight high inflation.
  • Last week major European Central banks surprised the markets with higher than expected rate hikes.
  • In addition, markets likely to monitor the Russian situation at the open, with the potential for safe haven buying. Source CNBC

In the SA

• The South Africa 10Y Bond Yield was 10.68% on Friday June 23, according to over-the-counter interbank yield quotes for this government bond maturity.
  • Investors flocking to buy SA government paper on the back of improved load shedding conditions in SA as well as a stronger Rand.
  • The yield gap between SA bonds and the G7 economies continue to provide an attractive “real rate of return” on a yield carry basis. Source : NT

On Friday

• DOW -219  to 33,727
• SP500 -33 to 4,348
• NASDAQ -138 to 13,492

image: Trading economics

OVERNIGHT HEADLINES

Asian markets
Eastern markets lower on the back of investor concerns as global central banks all turn hawkish.

• In Japan, the Nikkei 225 Index fell 0.1% to below 32,750.
• The market extending losses from last week as investor sentiment took a hit after a brief insurrection raised concerns about political instability in Russia.
  • Traders also citing aggressive monetary tightening by major central banks, that continues to weigh on markets.
    • Investors also grappled with softening economic data in Japan as the country’s economic recovery is being hampered by slowing global growth.
  • Technology stocks led the markets lower.
     
• In Australia , the ASX 200 Index declined  0.4% to below 7,080 on Monday.
  • The market sliding for the fourth straight session to its lowest levels in nearly three months.
    • Investor sentiment took a hit on the back of aggressive monetary tightening by major central banks.
    • Mining stocks led the market lower, with notable losses from BHP Group (-0.9%), Rio Tinto (-1%).
• In addition, Russian uncertainties also weighing on the markets, following the failed coup in Russia. |source: Reuters

Energy
Oil prices fluctuated wildly over the weekend after a failed military coup in Russia.

• US WTI and Brent crude futures jumped more than 1% toward $70 and $75 per barrel respectively, on Monday.
• Russia faced a brief rebellion by a private military group over the weekend, raising concerns about political instability in one of the world’s largest oil producers that could hamper supply.
  • The Wagner, paramilitary group advanced toward Moscow over the weekend before retreating.
    • The group’s leader, Yevgeni Prigozhin striking a deal with the Russian government to end the insurrection.
  • Russia has been a major oil supplier to Asian countries including China and India, as high energy prices prompted emerging economies to purchase discounted Russian oil.
• However, prices fell nearly 4% last week, on the back of further monetary tightening and hawkish messaging from major central banks.
  • Traders citing more hikes would almost certainly  hurt the outlook for the global economy and energy demand.  |source : Gulf News

Metals
Precious metals recovered on the back of safe-haven buying following the failed Russia coup.  

• Gold rose above $1,920/oz, rebounding from three-month lows as global economic uncertainties and political instability in Russia drove some safe-haven demand for the metal.
• The paramilitary group Wagner advanced toward Moscow on Saturday in an apparent insurrection, though it retreated shortly thereafter as a deal with the government was struck
• Meanwhile, the US Federal Reserve indicated  further rate increases this year to bring down inflation, while major central banks in Europe hiked rates by a larger-than-expected margin.
• Higher rates increased fears of a weaker global economy, causing a wave of cautious positioning across financial markets. |source : Kitco

Currencies
The Dollar rebounded after Central banks sounded the alarm, that higher rates are needed to combat inflation.

• The dollar index settled around 102.7 on Monday as traders continued to assess the economic and monetary policy outlook globally.
  • The index gained about half a percent last week, on the back of aggressive monetary tightening and hawkish messaging by major central banks.
• Traders also keeping an eye on Europe where Russia.
  • The Kremlin, saw a brief rebellion by a paramilitary group over the weekend.
• But, Fed Chair Powell said further rate increases are likely ahead as inflation remains too high.
• In addition, major European central banks hiked rates by a larger-than-expected margin. Source : Trading economics

Also, The Russian rouble lost nearly 3% (VS the Dollar) to trade at $83.65 after the failed Russian coup on the weekend.