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Morning NOTE

GOOD MORNING

The ZAR weakened nearly 3 % on the back of a resurgent Dollar, following the stronger than expected US Jobs report.

OPENING RATES

• USDZAR 17.4600
• EURZAR 18.8400
• GBPZAR 21.0600

SOUTH AFRICA

State of disaster

• The DA rejected a suggestion from the ANC NEC that Co-operative Governance and Traditional Affairs Minister Nkosazana Dlamini-Zuma to lead the national state of disaster on load shedding.
  • … should it be declared.
  • According to reports, the suggestion arose during the ANC’s NEC lekgotla.
    • Last week, President Cyril Ramaphosa alluded to the possibility of a state of disaster being declared over load shedding.
  • Declaring a state of disaster could unlock funds by removing red tape and other processes that slowed down the use of funds for emergency needs.
    • But the DA said Dlamini Zuma abused her powers in 2020 when a state of disaster was declared over COVID-19.
    • It added that it would not support a state of disaster unless a detailed outline of its structure, together with how it would be implemented, was tabled in Parliament. EWN

MABUZA RESIGNS

• Opposition parties say the announcement of Deputy President David Mabuza’s resignation should have been announced by President Cyril Ramaphosa, and not at a family gathering.
• Mabuza told mourners at a funeral service in Mpumalanga on Sunday that Ramaphosa would soon inform the country he was stepping down.
• He said he had agreed with Ramaphosa that he must step down as the country’s second-in-command.
• It would be to allow newly elected African National Congress (ANC) Deputy President Paul Mashatile to take over. EWN

SA Rugby

• South African Rugby is facing the prospect of a R258 million budget deficit for the year, a report indicates.
• According to Afrikaans newspaper Rapport, SA Rugby president Mark Alexander informed the governing body’s executive committee of the shortfall at a meeting in Cape Town late last month.

The Grammy’s

• Three South African artists came out tops at the 65th Annual Grammy Awards, winning best global music performance for their song, Bayethe.

• Wouter Kellerman, Nomcebo Zikode and Zakes Bantwini, took to the podium, each with a special thank you message.
  • Zikode, well-known as the singer in the hit-song Jerusalema thanked the audience. News 24

GLOBAL MARKETS

Stocks:

• Following a stronger than expected US jobs report, on Friday, the Dow lost 0.38%, the S&P 500 slipped 1.03% and the Nasdaq tumbled 1.59%.
  • Analysts noting that all 11 S&P sectors finishing lower led by consumer discretionary and communication services
  • US stock futures edged lower on Monday as investors cautiously awaited more earnings reports and a speech from Federal Reserve Chair Jerome Powell this week.
  • The moves came as stronger-than-expected US jobs data and disappointing earnings results from major US tech companies.
    • The data prompted investors to take profits and reassess the outlook for interest rates.
       
• However, it’s important to note, that since the Fed’s 25 basis point hike, the S&P 500 and Nasdaq still posted weekly gains.
   
• Investors now look ahead to more corporate earnings as well as Powell’s speech on Tuesday. Bloomberg

Bonds:

• US 10 Year Note Bond Yield was 3.55 percent,
  • The world’s most important interest rate jumping nearly 25 basis points from a low of 3.32% just head of the US Jobs report.
  • The stronger jobs data, a whopping 517k actual vs 185k expected, prompting traders to unwind bets on Fed pivot, and allowing for more Fed room to hike in 2023.
  • Fed Chair, Jerome Powell speaks tomorrow, and markets will watch his speech closely. 
    • Especially after he commented that the “disinflationary process had already started. CNBC

Yesterday

• The Dow declined 127 points to 33,926
• The SP500 fell 43 to 4,136
• The Nasdaq fell 193 to 12,006

•   Image: Trading Economics

OVERNIGHT HEADLINES

• The dollar rallied strongly to close above 103. The buck gaining than 1% in the previous session.
  • The stronger-than-expected US jobs data indicating the Federal Reserve has more room to hike interest rates.
    • The US economy added 517K jobs in January, the most since July and much more than market expectations of 185K.
    • But the Buck remains down about 10% from its September peak amid signs of cooling inflation in the US,
      • As well as the Fed’s decision to deliver a smaller 25 basis point rate hike in February.
    • Also, Fed Chair Jerome Powell said that the “disinflationary process has started”.
    • Investors now look ahead to Powell’s speech before the Economic Club of Washington on Tuesday to gain clarity on the Fed’s policy plans.
      • The dollar held recent gains against the euro, sterling and antipodean currencies, while it strengthened further against the yen. FX news

Asian markets mostly lower, after stronger-than-expected US jobs data suggested the Federal Reserve has more room to fight inflation.

• Traders also monitored simmering geopolitical tensions after the US military shot down a suspected Chinese spy balloon.
  • Shares in Australia, Hong Kong and mainland China declined, while Japanese stocks gained on a weakening yen.
• In Japan the Nikkei 225 jumped 0.8% to above 27,700, reaching seven-week highs as the yen weakened sharply against the dollar.
  • The Yen’s fall  making Japanese assets more attractive for foreign investors.
  • The yen weakened as stronger-than-expected US jobs data suggested further policy tightening from the Federal Reserve.
    • Newspapers also reported that  the government approached Bank of Japan Deputy Governor,  Amamiya, about succeeding Kuroda as central bank head.
    • Investors betting that  the current ultra-easy monetary policy would extend.
• In Australia the ASX 200 fell 0.25% to close at 7,539, retreating slightly from over 9-month highs and taking cues from a negative lead on Wall Street.
  • The unexpectedly strong US jobs data and disappointing earnings reports from major US tech companies halted the recent rally.
  • Investors also turned cautious ahead of the RBA’s  policy decision this week.
  • Traders expecting the RBA to raise interest rates for the ninth straight time with a 25 basis point increase.  Reuters
     
• Brent crude oil  steadied around $80/bl  per barrel on Monday, as well as US WTI crude oil holding above $73/bl.
  • Over the weekend, the IEA Executive Director Birol, said China’s economy could be poised for a stronger-than-anticipated rebound that will boost demand for crude.
    • A European ban on seaborne imports and price caps for Russian oil products also came into effect on Sunday.
    • Last week, OPEC+ decided to maintain its current output policy, with the Saudi’s saying that the kingdom will remain cautious about raising supply.
    • But, prices dropped more than 3% on Friday, bringing weekly losses to nearly 8%, after stronger-than-expected US jobs data.
  • The jobs report suggested the Federal Reserve has more room to hike interest rates.
    • A highly uncertain outlook for China’s demand recovery and robust Russian oil exports to Asia also weighed on energy markets. Bloomberg Energy reporting.
       
• Gold fell sharply on the back of a resurgent US dollar.
  • The yellow metal trading below $1900/oz to handle at  $1,880/oz on Monday morning.
    • Bullion hovering near its lowest levels in a month amid a general dollar strength.
    • The stronger-than-expected US jobs data suggested the Federal Reserve has more room to hike interest rates and also  dashing expectations, 
      • that the Fed and other central banks will soon end their tightening cycle.
    • Investors now look ahead to Fed Chair Jerome Powell’s speech before the Economic Club of Washington on Tuesday to gain clarity on future policy plans.
    • Gold is highly sensitive to the rates outlook as higher interest rates raise the opportunity cost of holding non-yielding bullion and vice versa.  Kitco metals report