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Morning NOTE

GOOD MORNING

The ZAR recovered sharply on Friday, on the back of a rebound in Risk assets.

OPENING RATES

• USDZAR : 17.6300
• EURZAR : 19.4400
• GBPZAR : 22.6600

SOUTH AFRICA

EFF 10 YEARS

• EFF leader Julius Malema said the party defied many naysayers by filling up the 90,000-capacity FNB Stadium for its tenth-anniversary rally.
• The calabash stadium was a sea of red on Saturday as thousands of EFF supporters from across the country converged to celebrate the party’s decade in existence.
• Political analyst Malaika Mahlatsi said this was a big political statement and spoke to the growing strength of the EFF.
• She said the EFF demonstrated its ability to mobilise people around a common goal. Source : EWN

SA RUSSIA

• President Cyril Ramaphosa has told Russian leaders that many African countries have found peaceful ways of resolving their conflicts and that Russia and Ukraine can do the same.
• The President, along with other African leaders, attended a working dinner on Friday night hosted by Russian President Vladimir Putin to discuss the ongoing conflict in Ukraine.
• The dinner meeting happened as the second Russia-Africa Summit ended on Friday and follows the recent “African peace mission” to Moscow and Kyiv. Source EWN

FUEL HIKES

• Unaudited data from the Central Energy Fund (CEF) is pointing to fuel price hikes for all fuel grades in August .
• The hikes dealing another blow for already cash-strapped South Africans, says the Automobile Association (AA).
•  According to the data, petrol ULP95 will climb by around 33 cents a litre, and petrol 93ULP by around 27c/l. But it’s the expected increases to diesel which are most concerning.
•  “The data is showing diesel will increase by around 68c/l which will, effectively, mean consumers will have to pay more for goods and services down the line.
• Illuminating paraffin, too, is expected to increase – also by around 68c/l.
• These are all significant upwards adjustments which will impact on all South Africans,” source :  the AA

GLOBAL MARKETS

Stocks

• US stock futures rose on Monday as July draws to a close, with Wall Street set to end the month with solid gains.
  • Futures contracts tied to the three major indexes were all trading in positive territory.
  • So far this month, the Dow is up 3.06%, the S&P 500 gained 2.96% and the Nasdaq Composite climbed 3.83% amid a broadening participation outside of mega-cap technology names.
  • Those moves came as the US economy’s resilience, easing inflationary pressures and lower odds of further monetary tightening from the Federal Reserve fuelled a market rally.
  • Last week, the Fed implemented a widely expected 25 basis point rate hike in what analysts suggested could be the last rate increase this year.
• Investors now look ahead to the key monthly jobs report this week, as well as corporate earnings reports from major US firms such as Apple, Amazon and Pfizer.

Bonds

• The yield on the US 10-year Treasury note hovered close to the 4% mark.
  • The yield adding nearly 20bps since the start of the third quarter and remaining close to the four-month high of 4.05% from July 7^th.
  • A batch of strong economic data strengthened the case for the FED to remain hawkish in its upcoming meeting.
  • Earlier data showed that the US GDP expanded by 2.4% in the second quarter, surpassing market expectations of a 1.8% increase.
• The Federal Reserve added 25bps to its target funds rate this month, as expected, and left the door open for another rate hike in September should economic data warrant more restrictive borrowing costs. Source Reuters

Market Close:

• DOW +176 to 35,459
• SP500 +44 to 4,582
• NASDAQ +266 to 14,316

OVERNIGHT HEADLINES

  image: Trading economics
 

Asian markets

• Stocks higher after US rally.

• In Japan, the Nikkei 225 Index rallied 1.9% to above 33,300.
  • The index hitting fresh 23-year highs despite pressure from rising Japanese government bond yields.
  • Japanese shares also tracked gains on Wall Street Friday as easing inflationary pressures in the US reduced the odds of further monetary tightening from the Federal Reserve.
  • Last week, the Bank of Japan maintained its policy of ultra-low interest rates but changed its language to make its yield curve control policy more flexible, allowing the 10-year yield to move beyond the 0.5% upper limit.
  • Notable gains were seen from index heavyweights such as Toyota Motor (2.6%). 

Energy

Oil prices higher on supply concerns.

• US WTI crude futures held above $80 per barrel on Monday and were set to end the month sharply higher as signs of tightening global supply and an improving demand outlook bolstered oil prices.
• The US oil benchmark is up nearly 14% so far in July, its best monthly performance since January 2022.
• Markets fretted about voluntary output cuts by Saudi Arabia and Russia that are squeezing the market.
• The former expected to extend its additional 1 million barrels per day cut through September.
• On the demand side, analysts upgraded their global oil demand forecasts for this year and next year, citing stronger growth estimates in major economies. Easing inflationary pressures in the US and growing expectations for an end in the Federal Reserve’s tightening campaign also boosted market sentiment.
• Source: Gulf News

Metals

Precious metals lower after US yields continue to rise.

• Gold remained under pressure around $1,950 an ounce on Monday.
• However , the metal was on track to gain about 2% this month, underpinned by growing expectations that major central banks may be nearing the end of the current monetary policy tightening cycle amid easing inflationary pressures.
• Last week, the Fed implemented a widely expected 25 basis point rate hike in what analysts suggested could be the last rate increase in the current monetary tightening cycle.
• Two officials from the European Central Bank also hinted at a possible end to interest rate rises as the outlook for the region’s economy worsened. Meanwhile, the Bank of Japan loosened its grip on interest rates, allowing the 10-year Japanese government bond yield to rise above 0.5%. source kitco

Currencies

Dollar higher on the back of strong US Data.

• The dollar index firmed up near 102 on Monday but was still set to lose more than 1% this month.
• The Buck on its second straight monthly decline as US inflation showed further signs of cooling, supporting expectations that the Federal Reserve’s current tightening cycle may be over.
• Data on Friday showed that annual core PCE prices in the US rose 4.1% in June, the lowest since September 2021 and less than market expectations of 4.2%.
• The dollar is set to decline on a monthly basis across the board, with the most pronounced selling activity against the Japanese yen as the Bank of Japan loosened its grip on interest rates. Source FX news