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GOOD MORNING
The ZAR drifted weaker following news of more banks in distress.
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SUMMARY
The Rand traded weaker to reach 18.2800 after trading close to R18.0000/$ after a dovish Fed.
- Investors once again concerned about the health of the global banking sector, after CDS of Deutsche Bank, spiked higher.
- CDS ( Credit default swaps), are contracts that provides insurance against a company’s potential default.
- When they trade higher(i.e. costs more), it implies investor concerns around the health of the company.
- In addition, the Head of the IMF, warned on Sunday that risks to financial stability had increased.
- She also stressed “the need for vigilance” following the recent turmoil in the banking sector.
- In addition , Kristalina Georgieva , said “the Fund”, expected 2023 “to be another challenging year”,
- with global growth slowing to below 3.0 percent due the war in Ukraine, monetary tightening and “scarring” from the pandemic.
- Risk off selling however slowed down after the US reported that the pace of outflows from regional banks into the mega banks, like JPM, CITI, have slowed.
- Last week saw a continued outflow of less than $100bn, that markets sees as a sign that the Fed’s liquidity mechanism is working.
- This after, US authorities aimed to shore up confidence in the US banking system by considering an expanded emergency lending facility for the banking sector.
- Janet Yellen, the US Treasury secretary also stating that the US banking system was “sound and resilient”.
- The Rand and other risk assets likely to get directional clues from the “banking sector confidence”
- Any positive news – will lead to ZAR GAINS; and
- Any negative news – will lead to ZAR Losses.
Data this week
Thursday
- 08h00 : PRIVATE SECTOR CREDIT YOY 8.62% EXPECTED VS 8.42% PREVIOUS
- 11H30 : SA PPI YOY 13.1% EXPECTED VS 12.7% PREVIOUS
- 14H30 : US GDP GROWTH RATE 2.7% EXPECTED VS 3.2% PREVIOUS
- 14H30 : US JOBLESS CLAIMS 196K EXPECTED
- 15H00 ; SOUTH AFRICA SARB MPC RATES DECSION
- EXPECTED 25 BPS HIKE .
- PRIME OVERDRAFT AT 11%
FRIDAY
- 14H30 : USA PCE 5.1% EXEPCTED VS 5.4% PREVIOUS
Market Movement Today:
- The ZAR opened weaker after European markets , dropped at the open.
- The local unit reaching Friday lows of 18.2600 in early Joburg trading.
- In the absence of the news, the weaker side of the market likely to be targeted by stop hunting algo’s;
- This was once again on display this morning.
- Comments from US officials that they are ready to use all tools available to support the banking sector, providing some respite to risk assets,
- This was evident on Friday, as stocks rose in New York allowing for the some gains.
- However, this morning we once again under pressure, following comments from the IMF that global growth could slow to sub 3% if the current banking crise continues.
- NB: the risk and escalation of the banking crises will likely place pressure on risk assets and this would favour the dollar.
- News of the spike in Deutsche’s CDS not helping sentiment and markets paying close attention to the global banking sector.
- The ZAR remains vulnerable to international capital flows and the volatility remains elevated given local conditions i.e. ESKOM and loadshedding.
- Technically a break of 18.2500 opens up 18.3800 before 18.5200.
- Trade : We encourage importers to hedge short terms commitments.
- The banking crises is ongoing and remains a risk to RISK ASSETS, as is evidenced by the lower SP500.
Expected Ranges:
- USDZAR : Expect a range 17.9600-18.3800
- Importers 18.1000-17.9600
- Exporters 18.2400-18.3800
- EURZAR : Expect a range of 19.4200-19.7200
- Importers 19.6200-19.7200
- Exporters 19.5200-19.4200
- GBPZAR : Expect a range of 22.0600-22.4200
- Importers 22.1800-22.0600
- Exporters : 22.3000-22.4200
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OPENING RATES
- USDZAR 18.1900
- EURZAR 19.5600
- GBPZAR 22.2500
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SOUTH AFRICA
FUEL PRICES
- The cost of fuel will decrease from the first week of April.
- This would be a much-needed reprieve for motorists and consumers.
- Automobile Association spokesperson Layton Beard says an announcement will be made soon.
- “The situation is pretty flat for petrol at the moment,” he said.
- “But we’re looking at an official announcement in a week’s time.” ENCA
ESKOM
- After another 11 hours free of load shedding on Sunday, power cuts returned at 4PM.
- In a statement, Eskom said stage 1 power cuts would be in effect until 5am on Monday morning.
- Stage 2 power cuts would then come into effect, and by Monday evening stage 3 electricity outages would be rolled out.
- If the state of the system remains as is, the country will seesaw between stage 1 and 2 load shedding from Tuesday. EWN
Putin arrest warrant prompts SA to seek legal advice
- The ICC issued the warrant against Putin on March 18 for war crimes related to the alleged abduction of children from Ukraine.
- South Africa’s government is taking legal advice on how to handle an ICC arrest warrant for President Vladimir Putin in the event the Russian leader attends a BRICS Summit in August.
- The ICC issued the warrant against Putin on March 18 for war crimes related to the alleged abduction of children from Ukraine. MONEYWEB
GLOBAL MARKETS
Stocks
- US futures rose on Monday as Wall Street looked to build on a strong performance last week.
- Investors continued to grapple with lingering anxiety over the banking crisis and escalating risk of a recession.
- Futures contracts tied to the three major indexes were all up about 0.5%.
- Last week, the Dow rose 1.18%, the S&P 500 gained 1.39% and the tech-heavy Nasdaq Composite jumped 1.66%.
- Those moves came as the Federal Reserve delivered a widely expected 25 basis point rate hike last week.
Regulators also aimed to assure markets that the US banking system remained stable and supported in various commentaries.
- Meanwhile, Minneapolis Fed President Neel Kashkari said over the weekend that the bank turmoil heightened the risk of a US recession.
- Investors now look ahead to several speeches from Fed officials this week.
Bonds
- US 10 Year Note Bond Yield was 3.41 percent on Monday March 27, according to over-the-counter interbank yield quotes for this government bond maturity.
- Government bond yields in Europe fell for a second session on Friday, with the benchmark 10-year Bund yield tumbling almost 20bps to 2.02%, the lowest in nearly two months.
- The events prompted a flight to safety as banks came under renewed pressure and investors pared bets on future rate increases.
- News of a U.S. probe on Credit Suisse and UBS and a big drop in Deutsche Bank shares weighed on traders’ confidence.
- Deutsche Bank suffered losses after, and its credit default swaps surged to the highest level since their first introduction in 2019. Reuters
On Friday
- The Dow gained 132 to 32,237
- The SP500 added 22 to 3,970
- The Nasdaq gained 36 to 11,823
 image: Trading economics
OVERNIGHT HEADLINES
The US dollar
- The US dollar remained steady around 103 and continues to benefit from the “flight to safety”.
- The Buck holding its recent advance as investors continued to assess the potential trajectory of the recent banking crisis and the outlook for Federal Reserve monetary policy.
- US authorities aimed to shore up confidence in the US banking system by considering an expanded emergency lending facility for the banking sector.
- Meanwhile, Minneapolis Fed President Neel Kashkari said over the weekend that the bank turmoil heightened the risk of a US recession.
- Investors now look ahead to a key measure of US inflation and several speeches from Fed officials this week. FX NEWS
Asian markets drifting higher, following a stronger close on Wall Street. Traders betting on a positive response from risk assets after;
- US authorities aimed to shore up confidence in the US banking system by considering an expanded emergency lending facility for the banking sector and stating that the US banking system was “sound and resilient.”
- In Japan, the Nikkei 225 rose 0.33% to close at 27,477, tracking an upbeat session on Wall Street Friday.
- However, caution prevailed as investors continued to assess the impact of the recent banking turmoil and heightened economic uncertainties.
- Minneapolis Fed President Neel Kashkari said over the weekend that the banking crisis increased the risk of a US recession.
- Investors also digested data showing leading economic indicators in Japan were revised higher for January. Reuters
Crude oil
- Global benchmark, Brent crude futures climbed above $75/bl on Monday.
- In addition, US WTI crude futures climbed toward $70 /bl , building on gains from last week.
- Assurances from US regulators allayed investors’ fears over a broader financial crisis.
- US authorities are contemplating an expanded emergency lending facility for the banking sector, though investors remain wary of further market volatility.
- Expectations that the Federal Reserve will soon end its tightening campaign and optimism over China’s demand recovery also supported bullish sentiment.
- Still, the US oil benchmark remains close to its lowest levels since December 2021 as growing fears of a US recession and resilient Russian supply weighed on the market.
- JPMorgan Chase & Co. is forecasting Brent to break below $60 per barrel in the near term, as reported by Bloomberg.
Gold
- Gold slipped below $1,980/oz on Monday, extending losses from the prior session, as flash readings for March showed that manufacturing and services activities in the US beat expectations.
- The US dollar tried to recover from 7-week lows, with the index standing around 103.
- This after St. Louis Fed President James Bullard indicated Friday that the US central bank is nowhere near done with its tightening stance and it will have to raise rates higher.
- Limiting the falls were worries that central banks have yet to contain the worst shock to the banking sector since 2008.
- On Friday, the cost of insuring Deutsche Bank’s debt against the risk of default surged to the highest on record.
- Adding to concerns. Meanwhile, Credit Suisse Group and UBS Group are under scrutiny by a US Justice Department into whether financial professionals helped Russian oligarchs evade sanctions.
- Gold has tested the $2,000 an ounce level a few times last week, amid sustained demand from top buyer China. Kitco metals
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