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Morning NOTE

GOOD MORNING

The ZAR consolidated near the weaker end of the range on the final day of trading for February.

OPENING RATES

• USDZAR 18.4400
• EURZAR 19.5200
• GBPZAR 22.2100

SOUTH AFRICA

RAMAPHOSA

• President Cyril Ramaphosa said on Monday the country has a focused action plan to comply with international standards to combat money laundering.
  • In his weekly newsletter, Ramaphosa welcomed the increased monitoring by watchdog Financial Action Task Force amid South Africa’s addition to the added to the organisation’s notorious grey list on Friday.
    • Ramaphosa said most of South Africa’s shortcomings in meeting the inter-governmental grouping’s requirements, related to law implementation, including:
    • an increase in investigations and prosecutions of serious and complex money laundering and terrorism financing.

De RUYTER

• Build One South Africa leader Mmusi Maimane has laid a criminal complaint at the Cape Town Police Station in connection with reported widespread looting at Eskom.
• He wants to compel authorities to get former Eskom CEO André de Ruyter to share the details of allegations,
  • he made against senior ministers and others allegedly privy to the corruption at the state power utility. NEWS24

ELECTRCITY CRISES

• President Cyril Ramaphosa has released an opposing affidavit in the case being brought by the United Democratic Movement (UDM) and 18 others,
  • clarifying government’s position on the provision of electricity under the Constitution.
  • He said, govt not constitutionally obligated to provide SA with power
  • The group wants the high court to declare the ANC , led government’s response to load shedding as unconstitutional and breaching a number of fundamental human rights.
  • The case is set to be heard on 20 March in the high court.  EWN

GLOBAL MARKETS

Stocks:

• US stock futures moved higher on Tuesday after a positive session on Wall Street during Monday’s regular session.
  • However, the major averages are on track to finish the month lower.
• On Monday, the Dow rose 0.22%, the S&P 500 gained 0.31% and the Nasdaq climbed 0.63%
  • However, the three major averages are on pace to end February lower as stronger-than-expected US economic data reinforced the case for further monetary tightening from the Federal Reserve.
  • Investors now look ahead to more US economic data and earnings reports from major firms such as Target, Snowflake and Autozone.

Bonds:

• The yield on the US 10-year Treasury note, seen as a proxy for global borrowing costs, jumped to above 3.94%, its highest level in three months.
• A batch of hot economic data strengthened expectations that the Federal Reserve will raise interest rates to a higher level and keep them restrictive for a longer period.
• On Monday, US Durable goods orders, sank 4.5% month-over-month in January of 2023, the most since April of 2020, and reversing from a downwardly revised 5.1% jump in December.
  • Figures compare with market forecasts of a 4% decline, prompted by a 13.3% slump in orders for transportation equipment, namely orders for nondefense aircraft and parts (-54.6%).

The data once again confirming the underlying headwinds the world’s largest economy faces, after the Fed ultra-hawkish stance to bring down inflation

Yesterday

• The Dow gained 72 to 32,989
• The SP500 added 12 to 3,985
• The Nasdaq gained 72 to 11,466

:  image: Trading economics

OVERNIGHT HEADLINES

The Dollar

• The dollar index extended losses to 104.9, down from a seven-week high hit above 105 as investors digest the latest economic data and try to gauge the next monetary policy steps.
  • Durable goods data disappointing sharply to the downside.
  • Hotter-than-expected economic data raised the prospect of interest rates staying higher for longer as the Federal Reserve fights stubborn inflation.
  • Investors have now priced at least three more 25 basis point rate hikes this year and see interest rates peaking at around 5.5% by June.
  • Market participants now look ahead to more US economic reports, such as consumer confidence, the ISM manufacturing survey, and corporate earnings.

• Asian markets higher across the region following a strong showing on Wall Street.  Investors looking to snap up bargains for the last day of trading
  • In Japan, the Nikkei 225 Index rose 0.08% to close at 27,445, extending recent gains and taking cues from a positive lead on Wall Street as investors continue to assess the outlook for the global economy and central bank policies.
  • Investors also digested data showing retail sales in Japan rose more than expected in January, while industrial production dropped more than expected.
  • Technology stocks led the charge, with notable gains from SoftBank Group (0.9%).

• In Australia, Retail sales in Australia grew by 1.9% mom to AUD 35.09 billion in January 2023, topping market consensus of 1.5% and shifting from a revised 4% slump in the prior month, flash data showed.
  • Non-food industries rebounded from large falls in December while sales at cafes, restaurants, and takeaway food rose to a fresh high after slowing in recent months.
  • The ASX 200 rose 0.47% to close at 7,258 on Tuesday, rebounding from over six-week lows, helped by gains in mining and energy stocks amid firmer commodity prices.
  • Australian shares also took cues from a positive session on Wall Street overnight as investors continue to assess the outlook for the global economy and central bank policies.
    • Heavyweight iron ore miners led the market higher, with strong gains from BHP Group (0.8%), Fortescue Metals (2.6%) and Rio Tinto (0.6%).
    • Gold and lithium stocks also advanced, including Newcrest Mining (0.1.
    • Elsewhere, energy firms gained as well on firmer oil prices, while coal miners declined. Reuters

Crude oil

• Brent crude futures traded around $82/bl and were on pace to decline for the fourth straight month.
  • The prospect of further monetary tightening and surging US stockpiles outweighed demand optimism from top importer China and production cuts from Russia.
    • Stronger-than-expected US economic data and hawkish signals from policymakers reinforced expectations that the Federal Reserve will need to keep raising interest rates to tame inflation.
    • The latest EIA report also showed that US inventories rose by 7.648 million barrels to 850.6 million in the week ending February 17th, the highest level since September.
    • However, keeping a floor under prices, Russia announced its plans to cut oil exports from its western ports by up to 25% in March, exceeding its announced output curbs of 500,000 barrels per day.

 
Gold

• Gold traded around $1,810/oz on Tuesday, hovering near its weakest levels in two months as stronger-than-expected US economic data reinforced the case for further monetary tightening from the Federal Reserve.
  • US core PCE prices, the Fed’s preferred inflation gauge, accelerated more than expected in January.
    • Over the weekend, US Treasury Secretary Janet Yellen told Reuters that the hot inflation reading signals that the fight against inflation “is not a straight line” and more work is needed.
  • Cleveland Fed President Loretta Mester also said on Friday that “it’s going to take more effort on the part of the Fed to get inflation on that sustainable downward path to 2%.”
  • Higher interest rates raise the opportunity cost of holding non-yielding bullion, making it less attractive for investors. Kitco metals