Morning NOTE

GOOD MORNING

The ZAR gained more than 2% on Monday on the back of Exporters banking profits in a thin liquidity environment due to the US labour day holiday.

• USDZAR 17.1300
• EURZAR 17.0500
• GBPZAR 19.8200

SOUTH AFRICA   

• Limpopo ANC endorsed Ramaphosa, for a second term and it recommended Mashatile for the deputy position.   
  • A statement by the party’s provincial executive committee, also proposes that its current chair Stanley Mathabatha be elected as ANC national chairperson
  • Northwest also backed CR for a second term,
    • but the final decision rested with the branches of who would represent the North West in the national elective conference in December. NEWS24
• However, more details continue to emerge Phala Phala
  • Cyril Ramaphosa’s responses to the Public Protector reveal the president knew about the $580 000 in cash for more than a month before it was stolen.
    • This likely to draw more questions from opposition parties as to what the extent of the theft was and how much the President actually knew. EWN
• SA’s biggest grocer Shoprite is paying out a record R3.54 billion to shareholder for its 2022 year.
  • The group rebound in liquor sales and a strong performance from its core domestic supermarkets business helped lift profits by over a 20%.
  • Merchandise sales grew 9.6% to R184 billion in the year to 3 July and profits jumped 21.5% to R5.73 billion.
  • Shoprite said on Tuesday, also reporting R6.2 billon worth of market share gains for its SA business. Moneyweb
• The SARB likely to raise interest rates for South Africans, and first-time homeowners may be under more pressure than others.
  • Rates likely to reach prime of 10%, i.e. pre-covid levels.
  • The next announcement by the Monetary Policy Committee (MPC) will be on September 22, and rates could increase by as much as 0.5% – maybe even more. Moneyweb

GLOBAL MARKETS

Stocks:

• US stock futures rose on Tuesday as traders kicked off a holiday-shortened week.
  • Dow futures were up 0.7%, S&P 500 futures gained 0.8% and Nasdaq 100 futures jumped 1%.
  • Last week, saw losses on Friday, while the tech-heavy Nasdaq Composite lost 1.31%, with all three benchmarks closing out their third straight week of losses.
  • Traders are also monitoring energy prices as a deepening energy crisis in Europe following news that Russia would halt gas flows to Germany.

Bonds:

• US 10 Year Yield remained above 3.2% ahead of Jay Powell’s speech on Thursday and the next Fed meeting.
  • Traders widely expecting a 75 bps rate hike at the next FOMC.
• Europe, the yield on the German 10-year Bund rose further to above the 1.6% mark in September.
  • This after annual inflation in the bloc hit another fresh high of 9.1% in August, above market forecasts, while surging energy costs also pressured domestic prices to remain soaring.
  • ECB policymakers consider a 75bps rate hike for their next meeting, citing elevated risks that inflation will become entrenched in expectations.
  • It was  the highest in two months, amid growing expectations of aggressive rate hikes by major central banks.

YESTERDAY

• NO TRADING DUE TO US HOLIDAY

OVERNIGHT HEADLINES

• Asian markets mixed after a holiday in New York yesterday.

  • In Japan, the Nikkei 225 flat lined with a small gain 0.02% to 27,626, as investors stayed on the side-lines amid a lack of market moving catalysts.
    • Investors are also looking ahead to speeches from Federal Reserve officials and policy decisions from other major central banks this week.
    • Meanwhile, Japanese Finance Minister Shunichi Suzuki commented on sharp yen moves on Tuesday,
      • saying heightened volatility was “undesirable” and that he was watching currency markets with a “great sense of urgency.”
  • In Australia, the ASX 200 Index fell 0.38% to 6,827 on Tuesday, reversing gains from earlier in the session and closing at its lowest level in over a month.
    • The Reserve Bank of Australia raised its policy rate by 50 basis points to 2.35% and signalled further tightening to bring inflation under control.
    • However, analysts noted that the RBA dropped a reference to “normalising” policy suggesting rates were getting closer to what the central bank considered neutral levels.  Reuter
       
• Crude oil declined toward $88/bl after gaining more than 2% in the previous session. Traders weighed the impact of a modest output cut by OPEC+ and the potential for further action from the group.
  • OPEC and its allies including Russia agreed to reduce output by 100,000 barrels a day from October, amounting to roughly 0.1% of global demand, to deal with macroeconomic headwinds.
    • It was also to counter a potential supply boost from Iran.
    • Saudi Arabia also said OPEC+ was willing to take further steps to support the global oil market if necessary.
  • Meanwhile, oil prices remain about 30% down since early June as tightening monetary conditions and recession fears continued to grip commodity markets. Gulf Energy news
     
• Gold prices increased above $1,710/oz, recouping some losses after sliding for the past three weeks.
  • The dollar’s relentless rally took a breather as traders took some profits and awaited speeches from Federal Reserve officials and policy decisions from other major central banks this week.
  • A deepening energy crisis in Europe following news that gas flows through the key Nord Stream 1 pipeline would not resume also reignited recession fears, pushing investors to rush for safer assets.
  • However Bullion, is likely to remain under pressure as the Federal Reserve is expected to push ahead with aggressive interest rate hikes to combat high inflation.  Kitco metals  
• The US Dollar steadied around 109.5 on Tuesday after pulling back from a two-decade high of 110.3 reached in the previous session.
  • Traders took some profits and awaited speeches from Federal Reserve officials for more clues on the central bank’s rate hike path.
    • Investors also turned cautious ahead of the European Central Bank’s rate decision later in the week.
  • Economists widely expecting the ECB to deliver a 75 basis point increase to combat inflation despite pressure from a worsening energy crisis.
    • Meanwhile, the Dollar remains strong as the Fed signalled that it would prioritize the fight against inflation over growth concerns.
    • Markets continued to price in 75 basis point rate increase this month.  FX news