View this email in your browser

Morning NOTE

GOOD MORNING

The ZAR weakened after the rebound in the Dollar and comments from the IMF than higher rates are needed to fight inflation.

OPENING RATES

• USDZAR 18.5700
• EURZAR 20.2900
• GBPZAR 23.6600

SOUTH AFRICA

ESKOM

• Eskom is changing its grid access rules to deal with constraints.
• Currently, allocations are made to projects based on a first come, first served basis – which effectively hogs grid space.
• But now Eskom wants developers to demonstrate that their projects are shovel-ready in order to be granted allocations.
• Eskom’s general manager for operations enablement, Velaphi Ntuli, said the changes had come about given grid constraints that are escalating with each public power procurement process.
• In addition, the opening up of the energy market for Independent Power Producers (IPPs).Source : ESKOM

Steinhoff

• The Oldenburg court in Germany says it hasn’t yet worked out how to get former Steinhoff International CEO, Markus Jooste, to stand trial abroad.
• The court recently issued a warrant of arrest for Jooste, following his absence in the dock alongside two other former German Steinhoff managing directors.
• Their trial began in April and it was expected that Jooste be tried simultaneously. Source EWN

GLOBAL MARKETS

Stocks
Equities lower after the USA and China clashed on AI technology as well as the potential for higher rates.

• On Tuesday, meanwhile, the Nasdaq rallied 1.65%, the S&P 500 jumped 1.15% and the Dow gained 0.63%, with ten out of the 11 S&P sectors finishing higher.
  • Those moves came as strong housing and durable goods orders data suggested the US economy remains resilient in the face of persistent inflation and high interest rates
     
• However, this morning we facing a different picture.
  • US stock futures dropped on Wednesday after the Wall Street Journal reported that the US government is considering new restrictions on exports of artificial intelligence chips to China.
  • Nasdaq 100 futures fell 0.4%, S&P 500 futures lost 0.2% and Dow futures shed 0.1%.
  • Tech semiconductor heavyweights Nvidia and AMD losing 3.1% and 2.4%, respectively, in after-hours trading.
     
• Investors now look ahead to Federal Reserve Chair Jerome Powell’s appearance before a policy panel in Europe on Wednesday for fresh clues on the rates path. Source : CNBC

Bonds
Government bond Yields after IMF calls for higher interest rates and Central banks to do more to combat inflation.

In the USA

• The yield on the US 10-year Treasury rose to 3.76% .
• Investors weigh fresh economic data pointing to a resilient economy and prospects that interest rates will continue to march higher.
• Durable goods orders beat forecasts for a third consecutive month,
  • In addition, new homes sales surged to the highest level in over a year and the CB consumer confidence hit the highest level since early 2022.
• Last week, Fed Chair Powell reiterated to the Congress that interest rates would need to go higher and signalled two more rate hikes.
  • Investors await further hints on the future rate path and will closely monitor appearances from several Fed officials.
  • Market participants are currently assigning a nearly 77% chance the Fed will deliver a 25bps increase in the fed funds rate in July. Source : Reuters

Yesterday

• DOW -+212 to 33,926
• SP500 +48 to 4378
• NASDAQ +219 to 13,555

image: Trading economics

OVERNIGHT HEADLINES

Asian markets
Eastern markets higher after a strong close in New York.

• In Japan, the Nikkei 225 Index gained 2.02% to close at 33,194, reversing losses from the previous session.
  • Japanese stocks taking cues from a strong lead on Wall Street. Upbeat US data boosted the economic outlook despite persistent inflation and higher borrowing costs.
  • Technology stocks led the charge.
  • In addition, a weak Yen cited as making stocks of companies who export particularly attractive.
     
• In Australia, ASX 200 Index climbed 1.1% to close at 7,197 on Wednesday. The index rising for the second straight session and tracking gains on Wall Street overnight.
  • Strong US data pointed to a resilient economy despite persistent inflation and higher borrowing costs.
  • Investors also digested softer-than-expected domestic inflation data which bolstered speculations that the Reserve Bank of Australia could be near the end of its tightening cycle.  Source : Reuters

Energy
Oil prices higher after surprise drop in US inventories.  

• WTI crude futures rose to $69/bl on Wednesday as investors digested industry data showing US crude inventories declined by about 2.4 million barrels last week.
  • The drop exceeding forecasts for a 1.5 million barrel decline.
  • US gasoline inventories also fell by about 2.9 million barrels compared to estimates for a 126,000 barrel draw.
  • On Monday, oil prices jumped after a short-lived insurrection by a paramilitary group in Russia over the weekend stoked fears of supply disruptions.
  • However, the market reversed on Tuesday.
  • US WTI prices losing more than 2% as the prospect of further monetary tightening weighed on the outlook for the global economy and future energy demand.
  • A slow post-pandemic recovery in China also clouded the demand outlook. Source: Gulfnews

Metals
Precious metals lower on US rates and calls by the IMF for Central bankers to do more.

• Gold held below $1,920 /oz on Wednesday.
  • Prices  hovering near its lowest levels in three months as upbeat US economic data supported the case for further interest rate hikes from the Federal Reserve.
  • Latest data showed that US consumer confidence jumped to a nearly 1-1/2-year high in June, while business spending, durable goods orders and home sales held up in May.
  • Last week, Fed Chair Jerome Powell said that further rate increases are likely ahead as inflation remains too high.
  • The ECB also said it expects euro zone inflation to remain elevated, making the case for further policy tightening.
  • Investors now look ahead to Powell’s appearance before a policy panel in Europe on Wednesday for fresh clues on the rates path.|source : Kitco

Currencies
The Dollar recovered off recent low’s following calls for more rate hikes by the IMF.

• The dollar index steadied around 102.6 on Wednesday after seeing small losses in the past two sessions,.
• Strong US data suggested the economy remains resilient in the face of persistent inflation and higher borrowing costs, supporting the case for further Federal Reserve policy tightening.
• US consumer confidence jumped to a nearly 1-1/2-year high in June, while business spending, durable goods orders and home sales held up in May.
• Last week, Federal Reserve Chair Jerome Powell said that further rate increases are likely ahead as inflation remains too high.
  • Other Fed officials mirrored his statements, with San Francisco Fed Bank President Mary Daly suggesting that two more rate hikes this year is a “very reasonable” projection.
  • Investors now look ahead to Fed Chair Jerome Powell’s appearance before a policy panel in Europe on Wednesday for fresh clues on the rates path. Source : Forexnews