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Morning NOTE

GOOD MORNING

The ZAR weakened on the back of stronger than expected US ISM Services data that showed Inflation remains a threat.

OPENING RATES

• USDZAR 17.4500
• EURZAR 18.3000
• GBPZAR 21.2500

SOUTH AFRICA

• Ramaphosa managed to win a crucial vote at the NEC debate to move the Phala Phala report to next week.
  • Opposition parties say the ANC’s NEC’s decision to reject the Section 89 panel report won’t change their approach and vote for the establishment of an impeachment inquiry.
  • Acting ANC,  secretary-general Paul Mashatile told the media following Monday’s special NEC meeting that the party would vote to oppose the establishment of the inquiry.
    • He addressed the media shortly before the party’s parliamentary caucus met where he communicated the decision to members.
    • The EFF & DA  have both called on the ANC MPs to vote in support of the establishment of an impeachment inquiry. EWN
       
• However the EFF looks to press ahead for force an impeachment inquiry.
  • Their leader Malema, saying he believes it has the numbers to ensure MPs vote in favour of an impeachment committee which could see President Cyril Ramaphosa booted out of office.
  • MPs at the National Assembly are set to debate the Phala Phala matter next week.
  • This on the back of the release of a Section 89 panel report which found that the president may have breached the Constitution and broke anti-corruption laws. NEWS24
     
• Johannesburg weather
  • Hailstones covered parts of Johannesburg in a white blanket as a thunderstorm swept across the city on Monday afternoon.
  • Branches and leaves struck down by the hailstones were seen lying on many streets.
  • The thundershower brought with it heavy rain, damaging winds and large amounts of hail.
  • Large hailstones battered windows as the storm broke suddenly after midday. IOL
     

GLOBAL MARKETS

Stocks:

• US stock futures consolidated after the major sell off during Monday’s session.
   
• Traders citing better-than-expected US services activity data suggested the Federal Reserve could raise interest rates for longer.
  • In regular trading on Monday, the Dow fell 1.4%, the S&P 500 dropped 1.79% and the Nasdaq tumbled 1.93%, with all 11 S&P sectors closing in negative territory.
    • The November services activity data, along with the November jobs report released last week, pointed to a resilient economy.
    • Still, the market is expecting the Fed to deliver a more moderate 50 basis point rate increase at its December meeting.
  • Investors now look ahead to US trade data that could throw light on the state of the global economy, as well as more earnings reports from US firms.

Bonds:

• The yield on the US 10-year increased toward 3.6%, up from an over 10-week low of 3.5% hit on December 2nd,.
  • The  surprising improvement in the US services sector lifted expectations the Federal Reserve will keep its aggressive tightening to curb inflation.
    • The ISM Services PMI unexpectedly jumped to 56.5 in November, rebounding from a more than 2-year low of 54.4 hit in October and beating market forecasts of 53.3.
    • The report comes after last week wrapped up with stronger-than-expected jobs data.
  • Last week the he US economy added a net 263k jobs during November, well above market forecasts of 200 thousand and showing further evidence that the jobs market remains tight.
    • Earlier, Fed Chairman Powell said that it may be appropriate to slow the pace of interest rate increases as there are recent data points to a slowdown in the US economy.

YESTERDAY

• The Dow fell 482 to 33,947
• The SP500 fell 72 to 3998
• The Nasdaq fell 221 to 11,239

•  Image: Trading Economics
   

OVERNIGHT HEADLINES

• Asian Markets were mixed on Tuesday following a selloff on Wall Street overnight as better-than-expected US services activity data stoked fears that the Fed could raise interest rate for longer.
  • Australian shares also declined as the RBA raised its policy rate by 25 basis points to 3.1%, taking borrowing costs to a level not seen in a decade.
  • In Japan, the Nikkei 225 rose 0.24% to close at 27,886, though gains were capped after better-than-expected US services activity data stoked worries that the Fed could raise interest rates for longer.
    • Investors also reacted to data showing household spending in Japan rose the least in five months,
    • while real wages fell to an over seven-year low as rising inflation outpaced modest growth in nominal wages.
  • In China, the Shanghai index added 0.02% to close at 3,213,
    • Markets higher as China continued to shift away from strict Covid restrictions.
    • Beijing announced that it is joining other cities in removing testing requirements to enter public venues.
    • Reuters reported that China could announce a further relaxation of Covid restrictions as early as Wednesday . REUTERS
       
• The US dollar held its recent advance to above 105 on Tuesday, supported by renewed concerns that the Federal Reserve will keep on raising interest rates following better-than-expected US services activity data.
  • The November ISM Services data, along with the solid November jobs report released last week, pointed to a resilient economy and bolstered the case for further monetary tightening.
  • Still, the market is expecting the Fed to deliver a more moderate 50 basis point rate hike at its December meeting following four straight 75 basis point increases
  • BUT questions on how long the central bank will need to tighten remain.
    • The dollar held recent gains against the euro, sterling and yen, while facing renewed pressure from the Aussie Dollar after the RBA raised interest rates further. FX NEWS

• US WTI crude  oil  rose above $77/bl on Tuesday, snapping a 2-day decline as easing Covid restrictions in China buoyed the demand outlook.
  • Supply-side uncertainties triggered by fresh sanctions on Russian oil kept the market on edge.
  • China easing restrictions as  major cities scrapped testing requirements that have hindered movement in the world’s top crude importer.
  • The shift in China’s Covid response was among several factors considered in OPEC+’s decision to maintain its current output policy.
  • Traders concerned after the higher than expected ISM data signalling the FED will  need to tighten for longer. GULF ENERGY NEWS
     
• Gold held its recent decline to around $1,770/oz.
  • Bullion under pressure following stronger than expected US ISM services data and a spike in US yields and the US Dollar.
  • Still, the market is expecting the Fed to deliver a more moderate 50 basis point rate hike at its December meeting following four straight 75 basis point increases,
  • But
    • questions remain on how long the central bank will need to tighten remain.
  • Higher interest rates dampen gold’s appeal to investors as they raise the opportunity cost of holding non-yielding bullion. KITCO METALS REPORT