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Morning NOTE

GOOD MORNING

The ZAR weakened from its strongest levels to trade at 17.9500 , following a decline in the SP500.

OPENING RATES

• USDZAR : 17.9100
• EURZAR : 19.6200
• GBPZAR : 22.3600

SOUTH AFRICA

National Treasury explained why it exempted Eskom from disclosing irregular and fruitless expenditure until 2025.

• National Treasury claims pressure would be placed on the fiscus and the borrowing powers of state-owned enterprises (SOEs);
  • if the exemption granted to Eskom from disclosing irregular and fruitless expenditure in its annual financial statements was not considered.
  • Reacting to widespread criticism of the exemption granted to Eskom,
    • National Treasury stressed on Monday the exemption still requires Eskom to disclose financial and non-financial information on irregular, fruitless and wasteful expenditure
      • – but only in its annual report. Moneyweb

• The JSE ended, all share index, ended the three-month period 4.2% higher.
  • In a quarter filled with surprise monetary policy tightening in major economies,
    • China’s reopening, and a mini banking sector rout in the US, the JSE finished the first three months of 2023 stronger, despite underperforming its global peers.
  • The JSE All Share Index closed the first quarter to end March 4.2% stronger.
    • In contrast, the US market, whose equities performed nearly two times better, gained 7.9% over the period.
    • This was despite contagion in the banking sector of the world’s largest economy,
    • caused by the collapse of Silicon Valley Bank (SVB) and the hawkish stance of the US Federal Reserve,
      • which looks set to continue being cautious, raising fears of more interest rate hikes. Moneyweb

Gold miners benefitting from the sharp rally in Bullion.

• Gold prices edged higher on Wednesday to touch their highest levels since March 2022.
  • This after weak US economic data spurred safe-haven demand and expectations that the Federal Reserve might loosen its monetary policy trajectory.
    • Spot gold was up 0.1% at $2,022.09/oz, as of 3.55am GMT.
  • Earlier in the session, bullion was closing in on record highs seen in 2020.
    • US gold futures were steady at $2,038.90. The dollar index hovered near two-month lows, making bullion cheaper for buyers holding other currencies. Business day live

GLOBAL MARKETS

Stocks

• In regular trading on Tuesday, the Dow fell 0.59%, the S&P 500 dropped 0.58% and the Nasdaq Composite tumbled 0.52%.
• US stock futures rose slightly on Wednesday after the major averages declined during Tuesday’s regular session,
  • as weakening US data pointed to further signs of a slowing economy.
• Futures contracts tied to the three major indexes were all up about 0.1%.
  • Investors digested data showing US job openings, a measure of labour demand, fell below 10 million for the first time since 2021 in February.
  • Factory orders also declined further, suggesting that the economy could be cooling amid higher interest rates.
  • Investors now look ahead to the latest ADP private payrolls report and the latest reading of the ISM Services Index on Wednesday.

Bonds

• The yield on the 10-year US Treasury note fell below 4%, approaching the six-month low of 3.37% touched on March 24th as recently released data tamed bets of further tightening by the Federal Reserve.
  • JOLTS data showed that the number of job openings in the US fell by 632K to 9.9 million in February, the lowest level since May of 2021, pointing that the labour market is cooling.
  • Earlier, ISM Manufacturing PMI showed a bigger-than-expected contraction in US factory activity.
  • Still, investors continued to weigh the risk of higher energy inflation after OPEC+ nations surprisingly cut oil production.
    • Money markets show that investors are undecided on whether the Fed will hike rates in its next meeting,
    • but show a broad consensus that the Fed will start cutting borrowing costs by the third quarter.

Yesterday

• The Dow declined 198 to 33,402
• The Sp500 fell 23 to 4,100
• The Nasdaq  fell 63 to 12,126

  image: Trading economics

OVERNIGHT HEADLINES

The US Dollar

• The US dollar held its recent decline against a basket of major currencies on Wednesday,
  • trading below the 102 mark and closing in on its lowest level since April 2022 as investors reassessed the outlook for monetary policy and growth.
  • US job openings, a measure of labour demand, fell below 10 million for the first time since 2021, while factory orders declined further,
    • suggesting that the economy could be cooling amid tighter financial conditions.
  • Money markets are now pricing a pause in interest rate hikes in May, with rate cuts expected soon after that.
    • The most pronounced selling activity was against the euro and the British pound. FX NEWS

Asian markets mixed as investors try to determine the next path for interest rates and risk assets.

• In Japan, the Nikkei 225 fell 1.68% to close at 27,813, retreating from three-week highs and tracking losses on Wall Street.
  • The weakening US data pointed to further signs of a slowing economy.
    • Investors also reacted to data showing Japan’s services PMI was revised higher in March amid a sustained recovery in the sector.
    • Commodity-linked stocks led the market lower.
    • Other index heavyweights also declined, including Mitsubishi UFJ (-2.6%), Fast Retailing (-1.9%), Toyota Motor (-2.5%), Nintendo (-3.1%) and Sony Group (-1.7%). Reuters

Crude oil

• US WTI crude futures steadied around $81 /BL on Wednesday as investors weighed a surprise production cut from OPEC+ against weakening US data.
  • The data pointed to further signs of a slowing economy.
  • Still, the US oil benchmark remains up about 7% this week after OPEC+ unexpectedly announced on Sunday that it will reduce output by 1.16 million barrels per day.
  • Traders also continued to be 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, investors digested data showing February US job openings fell below 10 million for the first time since 2021,
    • while factory orders declined further, suggesting that the economy could be cooling amid higher interest rates.  Gulf Energy news

Gold

• Gold steadied around $2,020/oz Wednesday, hovering near its highest levels in a year as weak US data fuelled expectations;
  • that the Federal Reserve may not need to tighten further in the coming months to prevent a recession.
  • Fresh data showed that US job openings, a measure of labour demand, fell below 10 million for the first time since 2021 in February.
  • US factory orders also declined further in February, suggesting that the economy could be cooling amid higher interest rates.
  • Markets now see a greater probability the Fed will leave the fed funds rate steady next month.
  • The recent banking crisis has also led to a surge in demand for safe-haven assets. Kitco metals