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Morning NOTE

GOOD MORNING

The ZAR continued its bullish trend, but stabilising below the R17/$ level of today’s 10h00 Phala-Phala report.

OPENING RATES

• USDZAR 16.9500
• EURZAR 17.5500
• GBPZAR 20.3200

SOUTH AFRICA

• 10h00 : Wednesday, 30 November 2022, could mark a key turning point in President Cyril Ramaphosa’s political future.
  • An independent panel is expected to hand over its report to Parliament on whether or not Ramaphosa should face an impeachment inquiry.
  • The 3-member panel chaired by former Chief Justice Sandile Ngcobo has been considering a complaint from the African Transformation Movement.
  • Already, DA chief John Steenhuisen has warned that the opposition will appeal if the panel doesn’t find against CR. EWN
     
• South Africa’s recent unemployment data shows that industry has adapted to the country’s electricity crisis.
  • The country seems to be on the mend in terms of employment, with 204,000 jobs gained in the second and third quarters of this year.
  • The unemployment rate has dropped by a percentage point from 33.9% in the previous quarter to 32.9% in the latest.
  • However, data points to the fact that even with the recovery SA remains a place with the most joblessness in the world. STATS SA
     
• Eskom diesel crises
  • Two security guards were arrested on Monday,  for stealing almost 6,000 litres of diesel.
  • They were employed by a company contracted by Eskom to protect the Port Rex power station in East London. News 24
     
• Price drop
  • The Central energy fund also announced Petrol prices to be hiked between 38-48cents a litre, but that diesel could drop between R1.29-R1.35/litre.
  • With oil prices lower almost 11% for the month, following the sharp drop in August, SA road users will experience some relief.
  • This also as demand worries out of China continues to pressure prices.
  • Demand likely to be affected as China’s daily Covid-19 cases hit new record highs and newer stricter lockdowns are being enforced, which will hit China’s economic growth. News24
     

GLOBAL MARKETS

Stocks:

• US stock futures held steady on Wednesday .
  • Traders are cautiously awaited Federal Reserve Chair Jerome Powell’s speech that could offer fresh clues on future rate hikes.
  • In regular trading on Tuesday, the Dow ticked up 0.01%, while the S&P 500 and Nasdaq dropped 0.16% and 0.59%, respectively. 
  • Those moves came as investors worried about further monetary tightening and its implications on growth.
  • This after key Fed officials said that interest rates will continue to rise well into next year as inflation remains stubbornly high.

• Markets now turn their attention to Powell’s appearance at the Brookings Institution for more guidance.
  • Investors also look ahead to a raft of US economic data on Wednesday, as well as more earnings reports.

Bonds:

• The yield on the US 10-year Treasury, consolidated around 3.7%, a level not seen since October 4^th.
  • Traders going against the language of FED stalwarts Bullard and Williams by betting on a policy pivot.
  • i.e. recession over inflation.
  • Minutes from the last Federal Reserve meeting showed officials see the case for a slower pace of interest rate rises.
     
• This outlook for monetary policy is decoupling from the one seen for Europe.
• The ECB reassured markets that its tightening cycle is far over despite the continent heading for a recession in the last quarter of 2022.
• Germany’s 10-year Bund yield, the European benchmark, rebounded from a two-month low to around 1.9%.

YESTERDAY

• The Dow added 3 points to 33,852
• The SP500 fell 6 points to 3,957
• The Nasdaq  fell 65 points to 10,938

•  Image: Trading Economics

OVERNIGHT HEADLINES

Asian markets

• In Japan, the Nikkei 225 Index fell 0.21% to close at 27,969, sliding for the fourth straight session, with technology stocks leading the decline.
  • Investors also turned cautious ahead of US Federal Reserve Chair Jerome Powell’s speech later in the global day that could guide the rates outlook.
  • Moreover, investors reacted to data showing industrial activity in Japan fell more than expected in October.
     
• In China, the Shanghai index fluctuated around the flatline on Wednesday as investors digested data from China.
  • Data showing Chinese manufacturing and services activities in November declined at the steepest pace since April.
  • Analysts citing surging Covid cases and tighter curbs weighed on the economy.
  • Investors also continued to track Covid developments after Chinese health officials announced on Tuesday that they would bolster vaccination among senior citizens.
  • This was seen as a key move  by experts for economic reopening, as widespread protests put pressure on the government to dial back strict Covid restrictions. Reuters
     
• The US  dollar index held above 106.5 on Wednesday.
• The buck consolidating recent gains as investors geared up for Jerome Powell’s remarks later today that could offer fresh clues on future rate hikes.
• The greenback rose more than 1% in the prior three sessions as key Fed officials signalled that interest rates could peak higher than previously anticipated.
  • Citing that inflation remains stubbornly high.
    • St. Louis Fed Presidents James Bullard & Williams  said the policy rate needs to rise to at least 5%, and that rates need to rise further and stay high through next year.
    • but, the Fed is widely expected to slow the pace of tightening to 50 basis points in December after delivering four straight 75 basis point increases.
• Investors also look ahead to the key monthly jobs report on Friday. FX NEWS
   

• US WTI crude oil rose  towards $79/bl after an industry report pointed to a large drop in US crude inventories.
  • Adding to supply cuts woes, with the OPEC+ meeting stoking fears of more production cuts.
    • API data showed that US crude inventories fell by almost 8 million barrels last week, far exceeding expectations for a 2.487 million barrel decrease.
  • On the demand side, oil prices were also lifted by news that China would bolster vaccination among its senior citizens.
    • This on the back of growing pressure on the world’s top crude importer to pursue economic reopening following widespread protests. Gulf energy news
       
• Gold traded above $1,750/oz.
  • the yellow metal remains supported against a subdued dollar on the back of lower Us yields.
  • Traders casting a firm eye on  US Federal Reserve Chair Jerome Powell’s speech later today that could guide the rates outlook.
  • Meanwhile, investors remain cautious as Fed officials signalled that interest rates will continue to rise well into next year to get ahead of inflation.
  • Still, the Fed is widely expected to slow the pace of its rate hike to 50 basis points in December after delivering four straight 75 basis point increases. Kitco metals