The Rand weakened on the back of negative Risk sentiment after US yields traded higher following strong US economic data.
- The Rand opening weaker in early Monday trading, after US yields once again breached the 4% level.
- The local unit likely to remain under pressure ahead of Wednesday’s key US FOMC meeting, where the Fed is expected to hike by 75bps.
- The focus will however be on the language used by Jerome Powell in the press conference after the FOMC decision.
- Traders keen to see if the FED will continue with its ultra-hawkish path or if the world’s largest central bank could slowdown and possibly only hike 50bps.
- Earlier this morning the Reserve Bank of New Zealand continued the “hawkish” inflation tone after major economies all printed higher than expected CPI last week.
- RBNZ Governor Adrian Orr saying that, “.. while the country was financially and economically well positioned..” inflation is still too high.
- CPI in New Zealand jumped 7.2% in the third quarter, slowing from a three-decade high of 7.3% notched in the second quarter but posting way above expectations for a steeper fall to 6.7%.
- Why NZ this morning?: Well, it paints a global inflationary picture, from Asia (Japan) , Europe (EU / France & Germany) , the Americas all enduring multi-decade high inflation.
- it is therefore my conclusion that we require a GLOBAL drop in inflation, before rates are to come down and markets enter a “NEW RISK ON PHASE” .
- This does not appear to be the case as reflected by rising Yields across the world.
- In addition, supply pressure endured by Oil prices once again approaching $100/bl likely to see this trend continue.
- This morning at 08h00: SA private sector credit (PSCE) expanded 9.74% YOY for September vs 8.15% expected as well as M3 money supply at 8.75% vs 8.25% expected.
- This likely to give the SARB confidence to continue hiking interest rates at its next meeting.
Significant Market Data:
- FOMC AND NON FARM PAYROLLS
- 08h00 : SA PSCE 9.74% YOY ACTUAL VS 8.15% EXPECTED.
- 08h00 : SA M3 8.75% YOY ACTUAL VS 8.25% EXPECTED.
- 14H00: SA BALANCE OF TRADE SEP R5.3BN EXPECTED VS R7.14BN.
- 16H00: US ISM MANUFACTURING -OCTOBER – 49.9 EXPECTED VS 50.9 PREVIOUS
- 14H15 : ADP – US PRIVATE PAYROLLS +190K EXPECTED VS 208K PREVIOUS
- 20H00 : US FOMC INTEREST RATE DECISION + 75 BPS – FED FUNDS TO 4% TO 3.25% PREVIOUS.
- 20H30 : FED PRESSER
- 14H00: UK BOE INTEREST RATE DECISION +75 BPS EXPECTED NEW RATE 3% PREVIOUS 2.25%
- 14H00: UK MPC MINUTES
- 16H00: US ISM NON MANUFACTURING 55.4 EXPECTED VS 56.7
- 14H30: US NON FARM PAYROLLS OCTOBER 200K EXPECTED VS 263K PREVIOUS
- 14H30: US UNEMPLOYMENT RATE 3.6% VS 3.5% PREVIOUS
- We expecting a weaker ZAR on the back of rising global yields ahead of this week’s KEY US FED MEETING.
- Stocks opening lower in Asian trading emphasising the RISK OFF sentiment.
- In addition, the US10YT once again above 4% indicating a market that remains nervous ahead of the FOMC .
- Therefore, It is unlikely the ZAR will register any gains of significance and we expect the local unit to continue to drift weaker.
- Trade: BUY USDZAR ON DIPS.
- USDZAR : Expect a range 17.9900-18.3300
- Importers 18.1000-17.9900
- Exporters 18.2400-18.3300
- EURZAR : Expect a range of 17.9300-18.2300
- Importers 18.0300-17.9300
- Exporters 18.1300-18.2300
- GBPZAR : Expect a range of 20.8000-21.3400
- Importers 20.9700-20.8000
- Exporters 21.1700-21.3400
- USDZAR 18.2100
- EURZAR 18.1100
- GBPZAR 21.1500
- 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.
- 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
- 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
- The Dow rallied 828 to 32,661
- The SP500 gained 93 to 3,901
- The Nasdaq added 309 to 11,102
- 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