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Morning NOTE

GOOD MORNING

The ZAR strengthened last week on the back of an unexpected SARB rate hike as well as weaker than expected US PCE data.

OPENING RATES

• USDZAR 17.9100
• EURZAR 19.3600
• GBPZAR 22.0000

SOUTH AFRICA

• Former Johannesburg mayor, Mpho Phalatse, has rubbished claims that she’s about to leave the Democratic Alliance (DA).
  • She lost out to John Steenhuisen, who was re-elected as DA leader at the party’s congress in Johannesburg over the weekend.
  • Phalatse said that she was considering her next move in the DA and would not be heading to ActionSA as speculated. EWN
     
• Urgent action is needed to fix SA’s crumbling rail network
  • It’s time to stop talking about policy and get the private sector involved, says Africa Rail Industry Association.
    • South Africa’s 21 000km rail network used to be a matter of national pride, accounting for some 80% of Africa’s total network.
    • This massively over-specked network needs to be pruned to no more than 5 500km and operated with the kind of financing and efficiency that the private sector.
      • according to the Africa Rail Industry Association (Aria). Moneyweb
• ESKOM : South Africans are bracing for another hard winter with more load shedding on the way.
  • This after more delays Koeberg 1 and its return to active electricity generation.
  • Unit 1 of the Koeberg nuclear power station was supposed to return to service 45 days after the latest deadline of 23 July.
  • The new target date of 13 September is a full 90 days after the original date of 8 June, when the 180-day outage was supposed to end.
  • This means the project team is overshooting its deadline by 50% and extending it to 270 days. Moneyweb

GLOBAL MARKETS

Stocks

• US stock futures fell on Monday ahead of the first trading day of the second quarter, as investors continued to assess the outlook for inflation, growth and interest rates.
   
• Nasdaq 100 and S&P 500 futures dropped 0.4% and 0.2%, respectively, while Dow futures were flat.
   
• Meanwhile, Wall Street came off a winning quarter, with the Nasdaq Composite surging 16.8% in the three months to March, while the S&P 500 and Dow climbed 7% and 0.4%, respectively.
  • Investors navigated volatility markets during the period marked by turmoil in the banking sector highlighted by the collapse of Silicon Valley Bank in March.
  • Still, technology stocks performed well and served as a safe haven bet for traders despite heightened economic uncertainties.
     
  • Investors now look ahead to a number of US economic releases this week such as jobs openings data on Tuesday,
    • ADP private payrolls report on Wednesday and the monthly jobs report on Friday.

Bonds

• The US 10 Year Bond Yield was 3.52% on Monday April 3, according to over-the-counter interbank yield quotes for this government bond maturity.
  • Yields finding support after OPEC’s surprise production cut and also once again bringing inflationary fears to the front of the discussion.

In the UK

• The yield on the UK’s 10-year rose above 3.5%, hitting its highest level since March 10^th.
• This after trader expects another interest rate hike by the Bank of England looks more likely in May.
• Governor Andrew Bailey stressed on Monday that interest rates may have to move higher if there were signs of persistent inflationary pressure after UK inflation unexpectedly rose to 10.4% in February.

On Friday

• The Dow gained 415 to 33,275
• The SP500 unchanged 4,109
• The Nasdaq added 208 to 12,221

  image: Trading economics

OVERNIGHT HEADLINES

The US Dollar

• The dollar climbed to around 103 on Monday, rising for the second straight session after OPEC+ surprised markets by announcing further production cuts.
  • The cuts reigniting fears that the Federal Reserve may need to keep raising interest rates to keep inflation under control.
  • Meanwhile, data released on Friday showed that US core PCE price growth, the Fed’s preferred gauge to measure inflation, slowed more than expected to 4.6% in February, the lowest in 15 months.
  • US consumer spending also rose moderately in February after surfing in the previous month.
  • Markets are now pricing an over 50% chance that the central bank will deliver a quarter-point rate hike in May, while expecting rate cuts by the end of the year. Fx news

Asian markets mixed and undecided following the OPEC CUTS.

• In Japan, the Nikkei 225 climbed 0.52% to close at 28,188, rising for the second straight session to the highest levels in three weeks, helped by gains in energy, financial and consumer stocks.
• Oil prices surged as much as 8% after OPEC+ announced a surprise production cut of more than 1 million barrels a day.
• Meanwhile, investors reacted to data showing Japan’s business sentiment tumbled to an over 2-year low in the first quarter as the banking crisis in the US and Europe added to uncertainty over already slowing global growth. Reuters

Crude oil

• US WTI crude futures surged about 7% to above $80/bl.
  • Prices hitting its strongest levels in over two months after OPEC+ announced a surprise production cut of more than 1 million barrels a day.
  • This complicates the outlook for inflation and interest rates, as investors had been betting that easing price pressures would give central banks room to pause the current tightening cycle.
  • A dispute involving exports of around 400,000 barrels a day from Turkey also tightened the market since last week, and seemed unlikely to be resolved anytime soon.
  • On the demand side, investors remain optimistic about China’s recovery, further supporting prices. Gulf energy news

Gold

• Gold weakened past $1,960/oz on Monday, extending losses from the previous session after OPEC+ surprised markets by announcing further production cuts.
  • the spike in bonds yields on the back of inflationary fears, sending Gold prices lower.
  • The group of major oil producers announced additional output cuts of around 1.16 million barrels per day.
    • Investors now look ahead to a number of US economic releases this week such as jobs openings data on Tuesday;
      • ADP private payrolls report on Wednesday and the monthly jobs report on Friday. Kitco metals