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Morning NOTE

GOOD MORNING

The ZAR traded in a relatively subdued range vs previous session as markets flipped between Risk On & Off after the BOE QE decision.

OPENING RATES

• USDZAR 17.9900
• EURZAR 17.6600
• GBPZAR 20.0200

SOUTH AFRICA

• After lots of pressure from opposition parties, with the country facing its longest continued power cuts,
  • Eskom CEO De Ruyter said he is confident power cuts will soon come to an end.
    • The SOE has now announced stage four power cuts until Saturday morning, and then stage three power cuts for the rest of the weekend.
    • However, De Ruyter gave no specifics. EWN
• In a bid to cover himself, Cyril Ramaphosa said , said the load shedding and power crisis was not a “willful and planned” intention of anyone in government.
  • Eskom was a “bed of corruption” and its current challenges happened over years, dissolving current leadership for the poor state of the utility.
  • However he admitted that the government has been a huge failure in terms of energy security, as the country faces its worst load shedding to date. EWN
• SA Banks face avalanche of demand from customers trying to ditch Eskom.
  • Faced with unprecedented demand for solar systems, banks are partnering with professional firms and offering a variety of financing solutions.
  • With various financing options, the major banks have also partnered with professional solar installers to ensure consistency in standards and quality of work. Moneyweb

GLOBAL MARKETS

Stocks:

• US futures were higher on Friday after the major averages turned back lower in the yesterday’s regular session.
  • The moves bringing them on track to end the week and the month lower as the bear market decline continues.
  • Futures contracts tied to the three major indexes shifted between small gains and losses.
• In regular trading on Thursday, the Dow fell 1.54%, the S&P 500 tumbled 2.11% and the Nasdaq Composite sank 2.84%,
  • All three benchmarks on track to end the week and the month at least 1% and 7% lower, respectively.
  • The moves came as investors feared that a hawkish Federal Reserve could tilt the US economy into a recession and hurt company earnings

Bonds:

• The US 10-year yield consolidated above 3.8% after briefly topping the 4% mark earlier this week.
  • It was  level not seen since April 2010, as investors brace for further aggressive monetary policy tightening by the Federal Reserve while big swings in the gilts market rattled sentiment.
• Several hawkish Fed speeches this week confirmed the central bank’s commitment to bring inflation back to its 2% target even at the risk of a recession.
  • The terminal rate, the peak spot where the federal funds rate is, is now seen at 4.6%, with policymakers anticipating cutting interest rates in 2024 and extending that into 2025.

• Meanwhile, the Bank of England was forced to restart its quantitive easing program to steam a crisis in government debt markets and avoid a meltdown in the Uk pensions sector.

• Still, it was a short-lived relief as the British Treasury needed to reveal a plausible plan to get debt under control to restore market confidence.

YESTERDAY

• The Dow declined 458 to 29,225
• The SP500 fell 78 to 3,640
• The Nasdaq  fell 314 to 10,737

•  Image: Trading Economics

OVERNIGHT HEADLINES

Asian markets trading lower on the back of another drop on Wall street.

• In Japan, the Nikkei 225 fell 1.83% to 25,937, closing at its lowest levels in about three months and taking cues from a negative lead on Wall Street.
  • Traders citing persistent concerns about surging inflation, rising interest rates and a highly uncertain global economic outlook weighed on sentiment.
    • Those moves came despite better-than-expected Japanese economic numbers, with the unemployment rate ticking down, while industrial output and retail sales figures exceeded forecasts.
    • Nearly all sectors in Japan declined on Friday.
• In Australia, the ASX 200 dropped 1.23% to close at 6,474, heading back to its lowest levels in over three months and tracking overnight losses on Wall Street.
  • Renewed selling in global markets dampened local sentiment as investors continued to grapple with surging inflation and mounting recession risks.
  • Nearly all other sectors declined, including financial, consumer and clean energy-related names.  Reuters

• The US dollar declined below 112 on Friday, after retreating from a 20-year high of 114.778 hit earlier this week.
  • The Buck however is still headed for another strong monthly gain on expectations that the FED  will tighten monetary settings further to bring down high inflation.
  • The index is up about 3% so far this month and is trading nearly 7% higher for the quarter.
  • Fed policymakers reiterated this week that the central bank needs to raise interest rates to restrictive levels amid persistent inflationary pressures.
  • The greenback also benefited from increased haven demand given the US economy’s strength relative to other developed nations.
     
• Crude oil consolidated around $81/bl and were set to decline for the fourth straight month.
  • Oil markets have been selling off since June on tightening monetary conditions that sparked concerns over a global recession and weaker energy demand.
    • In addition a rampant Dollar added to the bearish sentiment.
  • The US oil benchmark is also on track to post its first quarterly loss since the first quarter of 2020, being down about 23% so far since the end of June.
    • Meanwhile, investors are looking ahead to an OPEC+ meeting on Oct. 5 as weaker oil prices gave rise to speculations that the cartel could announce another supply cut.
    • Markets are also monitoring an escalating energy conflict between the EU and Russia as an EU ban on Russian oil is set to take effect on Dec. 5. Gulf Energy news
       
• Gold flatlined around the $1660/oz level but were still set to drop for the 6th straight month.
  • The drop on the back of a strong Dollar and rising Treasury yields.
  • The spike in yields on the back of expectations that the FED will push ahead with its aggressive plan to quell surging inflation.
  • The metal is down nearly 3% so far this month and is trading about 20% below this year’s high.