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Morning NOTE

GOOD MORNING

The Rand weakened on the back of negative Risk sentiment after US yields traded higher following strong US economic data.

OPENING RATES

• USDZAR 18.2100
• EURZAR 18.1100
• GBPZAR 21.1500

SOUTH AFRICA

• Terror expert, Jasmine Opperman, said that the terror alert did serve its purpose since there was no attack.
  • He said, the country’s intelligence committees cannot afford to rest on their laurels despite an uneventful weekend.
    • Last week, the US embassy sent a terror alert to its citizens about an imminent attack in Sandton.
  • The alert caused a diplomatic impasse between the US and South Africa’s intelligence agencies, with President Cyril Ramaphosa accusing the American embassy of jumping the gun.
    • There was a heightened police presence at the Pride march, which was one of the high profile events happening across the country.
    • The other events included the Soweto derby at the FNB Stadium and the coronation of the Zulu king at the Moses Mabhida Stadium in Durban. EWN
       
• South African telecoms operator Telkom has launched its 5G high-speed internet network using technology from China’s Huawei Technologies, the companies said on Thursday.
  • Telkom, part-owned by the state, joins bigger rivals Vodacom and MTN and smaller peer rain in the 5G race.
  • It wants to boost its fast-growing mobile data and fixed line broadband businesses, amid increasing demand for broadband. Moneyweb

Eskom: stage 2: after a loadshedding free weekend.

• Also, Gauteng Premier Panyaza Lesufi wants Soweto’s debt to Eskom to be scrapped.
• Lesufi says that debt forgiveness for “townships”, informal settlements and hostels is needed for their development.
• By the end of September, Soweto owed Eskom roughly R4.7 billion.

GLOBAL MARKETS

Stocks:

• US stock futures were little changed ahead of the last trading day of October, with the major averages set to finish the month markedly higher.
  • Traders awaited the Federal Reserve’s policy meeting this week.
  • For the month of October, the Dow is currently up 14.4% and is set to book its best monthly gain since 1976, while the S&P 500 and Nasdaq are up 8.8% and 5%, respectively, so far this month.
    • Those moves came as investors started to speculate on a potential slowdown in the global tightening cycle, though mixed third quarter earnings results and economic uncertainties continued to hang over markets.
    • Investors now look ahead to the Fed’s policy decision on Wednesday, where it is expected to hike rates by another 75 basis points,
    • while Wall Street will be looking for signals of a potential dovish shift.  CNBC

Bonds:

• The US 10-year Treasury note yield bounced back above the 4% mark as investors digested the latest GDP reading while reassessing the outlook for monetary policy.
  • The first estimate of third-quarter GDP showed that the economy grew by 2.6%, above market expectations of 2.4%.
  • Also returning to growth after two consecutive quarters of decline.
• Still, the report showed that consumer and business spending faltered amid stubbornly high inflation and tighter financial conditions.
  • On the policy side, Federal Reserve is still expected to increase its key rate by 75bps in November.
  • However, speculation grows that policymakers are considering slowing down the pace of interest-rate hikes later this year amid intensifying macro headwinds.
  • Meanwhile, a series of hot inflation in developed economies, notably Germany, France, and Italy, also rattled bond investors.
  • Germany’s 10-year Bund yield, the European benchmark, rose above 2.1%. Reuters

ON FRIDAY

• The Dow rallied 828 to 32,661
• The SP500 gained 93 to 3,901
• The Nasdaq  added 309 to 11,102

•  Image: Trading Economics

OVERNIGHT HEADLINES
 

• Asian markets higher following Friday’s strong showing on wallstreet, but starting to drift lower ahead of the FED’s rate decision on Wednesday.
  • In Japan, the Nikkei 225 surged 1.78% to 27,587 closing at their highest levels in over a month and taking cues from a strong lead on Wall Street.
    • Traders now  look ahead to the US Federal Reserve’s policy decision this week.
    • Investors also digested mixed domestic economic data, with annual retail sales in Japan exceeding forecasts in September, while industrial output in the country for September fell more than expected on a monthly basis.
      • Technology stocks led the rally, 
  • In Australia, the ASX 200 rose 1.15% to 6,864 on Monday, closing at its highest level in over six weeks. This on the back of an upbeat Friday session on Wall Street.
    • Investors are also looking ahead to the Reserve Bank of Australia’s (RBA) policy decision on Tuesday.
    • The RBA  is expected to press ahead with plans of delivering smaller rate hikes despite persistent inflationary pressures.  Reuters
       
• The US dollar firmed up around 110.8 on Monday, holding a recent advance as robust consumer spending and persistent inflationary pressures.
  • The buck supported by  the Federal Reserve to remain aggressive in its tightening campaign.
  • The central bank is widely expected to hike rates by another 75 basis points this week,
  • though markets will be looking for any dovish hints from Fed Chair Jerome Powell’s speech after the meeting.
  • The language in the press conference will be key in deciding future direction.  FX news
     
• The Japanese yen weakened toward 148 per dollar.
  • The yen remains pressured by a widening policy divergence as the BOJ  maintained its policy of ultra-low interest rates, while the FED  is expected to tighten further to fight persistent inflationary pressures.
  • Meanwhile, the yen rebounded sharply from a 32-year low of 151.94 hit on Oct. 21st in a suspected intervention.
  • The  Financial Times reporting that the government likely spent $30 billion in its latest yen-buying operations.
  • The currency also benefited from speculations that the Fed would soon slow the pace of its rate increases, though analysts were quick to warn that such a view is too premature given the US economy’s resilience.
  • Elsewhere, Japan’s reliance on foreign goods pressured the yen as well, as businesses are forced to purchase even more dollars to settle imports. Bloomberg

• Brent crude oil traded near $96/bl on Monday and were headed for the first monthly gain since May.
  • Traders braced for large OPEC+ production cuts that threaten to tighten the market further heading into winter.
    • The oil cartel is set to reduce output by 2 million barrels per day from November in a move largely seen as aimed at keeping prices high.
    • The EU ban on Russian oil is also set to take effect on Dec. 5 as part of broader sanctions for the invasion of Ukraine.
  • Meanwhile, looming risks of a global recession and a weakening demand outlook continued to weigh on oil markets.
    • Persistent Covid-induced curbs in China also clouded the outlook, as the country clings to the Covid Zero policy .
    • Elsewhere, Iran and Russia are set to discuss a $40 billion plan on Monday to develop oil and gas fields in Iran, Bloomberg reported. Gulf energy news
       
• Gold prices traded near $1,640/oz in subdued trade on Monday, holding a recent decline as investors stayed on the side-lines ahead of a highly-anticipated US Federal Reserve meeting.
  • The metal was also pressured by a slight rebound in the dollar and Treasury yields as underlying inflationary pressures in the US remain elevated.
  • Meanwhile, markets will be looking for signals from Fed Chair Jerome Powell’s speech after the meeting about a potential slowdown in US monetary tightening later this year.  Kitco metals report