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Morning NOTE

GOOD MORNING

The ZAR consolidated around the 17.8000 level ahead of this week’s Jobs report.

OPENING RATES

• USDZAR : 17.8300
• EURZAR : 19.4200
• GBPZAR : 22.1300

SOUTH AFRICA

Rate hikes

• Last week’s SARB rate still a topic of major concern for South Africans.
  • The bigger-than-expected repo rate hike announced by the South African Reserve Bank (Sarb) on Thursday will put even more pressure on those with home and car loans, immediately pushing up the cost of financing.
  • Delivering its second monetary policy statement of the year, the central bank hiked the repo rate by 50 basis points (bps) to 7.75% – pushing the prime lending rate of commercial banks to 11.25%.
  • This is the ninth hike since the Sarb took on a combative fight to rein in stubbornly high inflation at the end of 2021; since then the repo rate has risen by a combined 425bps, from a Covid-era record low of 3.5%.
  • The knock-on effect of the cumulative increases has put pressure on household spending, as the cost of servicing debt becomes more burdensome. Moneyweb

VISA’S

• The SA government’s failure to fix its visa system is seriously impeding the economy and needs to be urgently fixed, one of the nation’s main business-lobby groups said.
• Tens of thousands of foreigners working or intending to work in South Africa faced having their visas cancelled at the end of March because the authorities were unable to process their applications
  • “We have major skills deficits in many areas,” BLSA Chief Executive Officer Busi Mavuso said in the statement;
• “We need to give international companies the sense that they are welcome and the confidence to plan on investments;
  • without the fear that they will simply be unable to send their people because we cannot manage our own bureaucracy.” Moneyweb

ESKOM

• National Treasury said the exemption that it granted Eskom did not mean that the power utility should not take appropriate steps to prevent irregular, fruitless, and wasteful expenditure.
• The department said that the move was meant to prevent the power utility from receiving qualified audit opinions, among others.
• National Treasury further said the exemption granted to Eskom would enable it to continue to fund its balance sheet and still maintain accountability and transparency.  Ewn

GLOBAL MARKETS

Stocks

On Monday, the Dow and S&P 500 climbed 0.98% and 0.37%, respectively, helped by gains in energy stocks amid a jump in oil prices.

• This morning US stock futures were little changed after the major averages ended mixed during Monday’s regular session.
• Investors weighed a surprise production cut from OPEC+ and its impact on inflation and Federal Reserve monetary policy.
  • Futures contracts tied to the three major indexes drifted flat to slightly negative.
  • Meanwhile, the Nasdaq Composite lost 0.27%, weighed down by technology shares as investors were worried that the Fed may need to tighten policy further to keep inflation under control.
• In corporate news, Tesla dropped 6.12% after the company missed first-quarter deliveries estimates.
• Investors now await key economic data to be released during this week, including ISM Services PMI, JOLTS, ADP employment and the highly-anticipated NFP.

Bonds

• The yield on the US 10-year yield, was little changed at 3.43%.
• Yields drifting lower after the latest ISM Manufacturing PMI showed a bigger than expected contraction in US factory activity, easing concerns about the need of more rate hikes.
• The reading came in at 46.3 in March, the lowest since May of 2020, in a sign that tighter credit conditions are already hurting the economy.
• Early in the week, a surprise cut in oil production by OPEC+ raised fears about further inflationary pressure and the need of more rate hikes. 

Yesterday

• The Dow gained  327 TO 33,601
• The Sp500 added 15 to 4,124
• The Nasdaq  declined 32 to 12,189

  image: Trading economics

OVERNIGHT HEADLINES

The US Dollar

• The dollar traded near 102 on Tuesday after losing half a percent in the previous session.
  • The buck weighed down by weaker-than-expected US manufacturing data which pointed to further signs of a slowing economy.
  • The data also countered bullish bets following a surprise cut in oil production by OPEC+ that stoked fears of further inflationary pressures and the need for more interest rate hikes.
    • St. Louis Fed Bank President James Bullard said OPEC+’s decision to cut output was unexpected and an increase in oil prices could make the Fed’s job of lowering inflation more challenging.
  • Investors now look ahead to more economic releases in the US this week, including ISM Services PMI, JOLTS, ADP employment and the highly-anticipated NFP.  Fx NEWS

Asian markets following wall street higher and receiving another boost after the RBA decided to hold rates steady at its April meeting, citing the lagging effects of monetary policy.

• In Japan, the Nikkei 225 rose 0.35% to close at 28,287 rising for the third straight session.
  • Gains were capped as investors continued to assess the impact of a surprise production cut from OPEC+ on inflation and monetary policy.
  • The surprise announcement by the group of major oil producers stoked fears that the US Federal Reserve may need to tighten policy further to keep inflation under control.
• In Australia, the ASX 200 Index edged up 0.18% to close at 7,236 on Tuesday, hovering near its highest levels in over three weeks after the Reserve Bank of Australia paused its rate-hiking campaign.
  • The Bank citing it wanted additional time to assess the impact of past increases on the economic outlook.
  • The RBA kept the cash rate unchanged at 3.6% at its April 2023 policy meeting after raising interest rates for ten consecutive sessions.
  • Investors also continued to assess the impact of a surprise production cut from OPEC+ on inflation and monetary policy, amid concerns that the Federal Reserve may need to raise interest rates further to keep inflation under control. 

Crude oil

• WTI crude futures held above $80/bl on Tuesday after surging more than 6% in the previous session.
  • Prices underpinned by a surprise production cut of more than 1 million barrels per day from OPEC+.
    • This accelerated short-covering in the market as traders have been reducing short positions in oil even before the surprise announcement.
  • Investors also remain optimistic about the outlook for Chinese demand, as the country’s economic recovery is expected to help cushion the impact of slower global growth.
  • Meanwhile, market watchers are gauging the effect of the latest output cuts on Federal Reserve monetary policy, amid concerns that the central bank may need to tighten policy further to keep inflation under control.  Gulf energy news

Gold

• Bullion steadied around $1,980 /oz on Tuesday as investors continued to assess the outlook for Federal Reserve monetary policy in light of weaker-than-expected US manufacturing data and a surprise production cut from OPEC+.
  • The metal tumbled early on Monday as the surprise announcement from OPEC+ stoked fears of further inflationary pressures and the need for more interest rate hikes.
  • However, gold prices recovered later in the session after data showed that US manufacturing activity contracted for the fifth consecutive month in March and by the most since May 2020.
  • Investors now look ahead to a raft of employment data in the US this week, as well as interest rate decisions from the central banks of India, Australia and New Zealand. Kitco metals