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Morning NOTE

GOOD MORNING

The ZAR gained 2.88% after a stronger than expected NFP report, but higher US unemployment rate that printed at 3.7%.

OPENING RATES

• USDZAR 18.3100
• EURZAR 17.9300
• GBPZAR 20.5200

SOUTH AFRICA

• The campaigning for the ANC leadership and possible SA presidency continued this weekend .
  • Former president, Jacob Zuma also had his say in the Phala-Phala saga.
  • Zuma told party supporters in Ethekwini on Sunday that they should raise questions at Nasrec about the robbery at Ramaphosa’s game farm in 2020.
  • Ramaphosa has denied accusations of a cover-up and contravention of the country’s laws after the alleged theft of millions of dollars at his farm. EWN
     
• Energy Minister Gwede Mantashe says the country’s renewable energy transition shouldn’t come at the expense of coal mining communities.
  • Mantashe was speaking in Carletonville on Sunday at the ANC’s Letsema programme.
  • President Cyril Ramaphosa said last week that he had approached the US government for a loan as part of government’s multi-trillion rand plan to move the country to a zero-carbon economy.
  • Mantashe said on Sunday there are communities that are going to be affected by this transition.
  • He also called on developing countries to help in footing the bill.  Thus far $8.5bn has been pledged to help SA.  EWN

    Eskom and higher electricity prices

• A settlement reached by Eskom and energy regulator Nersa, related to a crucial element in the determination of the power supplier’s average tariffs.
  • Analysts say it may cost consumers dearly when the regulator finalises what consumers will be paying for electricity in the next two financial years.
  • The tariff determination is on the agenda of a Nersa electricity sub-committee meeting on Tuesday,.
  • It is  expected to make a recommendation to the regulator about the 32% increase Eskom wants in April next year and a further 10% a year later.  Moneyweb

GLOBAL MARKETS

Stocks:

• US stock futures fell on Monday as sentiment was dampened after China reiterated its commitment to its strict Covid Zero policy over the weekend.
  • Also, investors also remained cautious ahead of key US inflation report this week. Futures contracts tied to the three major averages declined at least 0.6%.
  • Hurting sentiment further, Apple warned of reduced iPhone 14 and iPhone Pro Max production due to Covid-related disruptions at an assembly facility in Zhengzhou, China.
  • Last week, the major averages ended lower as the Federal Reserve signalled a more hawkish stance than markets anticipated.
  • The Dow losing 1.4%, while S&P 500 and Nasdaq Composite tumbled 3.4% and 5.7%, respectively. 

Major corporate news is that META (Facebook’s parent), plans significant reduction in employee numbers. This according to the Wallstreet Journal.

• The layoffs are expected to impact thousands of employees, the report said, and the move would mark the first major headcount reduction in Meta’s history.
  • At the end of September, the company reported that it had more than 87,000 employees.
• A Meta spokesperson declined to comment and referred CNBC to Zuckerberg’s comments on the company’s latest earnings call last month.
  • The layoffs are expected to impact thousands of employees, the report said.
• Meta shares have plummeted 73% this year, falling to their lowest since early 2016, and the social media giant is now the worst performer in the S&P 500 in 2022. Reuters

Bonds:

• US 10 Year Note Bond Yield was 4.15% in early Monday trading. As trader price in a 50bps hike by the Fed in December after last week’s 75 bps hike.
  • Attention also turning to Thursday’s US CPI report with 8% YOY expected.
    • The benchmark interest rate consolidating above 4% after a stronger than expected US NFP report, although the unemployment rate dripped higher at 3.7%.
       
• On Friday, data showed, the US economy added a stronger-than-expected 261K jobs in October of 2022.
  • It was above market forecasts of 200K.
  • Although it is the weakest reading since December of 2020, figures continued to point to a strong labour market.
  • Also, September were revised higher by 52K to 315K.  CNBC

ON FRIDAY

• The Dow  gained 401 to 32,403
• The SP500 added 50 to 3,770
• The Nasdaq  added 132 to 10,475

•  Image: Trading Economics
   

OVERNIGHT HEADLINES

Asian markets higher across the region following the rally on Wallstreet on Friday .

• In Japan, the Nikkei 225 added 1.21% to close at 27,528, recouping some losses from the previous session.
  • Japanese shares tracked a Friday rally on Wall Street as investors continued to assess the trajectory of US Federal Reserve rate hikes.
  • Meanwhile, market caution capped gains as China reiterated its commitment to the strict zero-Covid approach over the weekend, dashing hopes for a policy pivot.
  • After the Covid announcement, more bad news out of China.
    • The country reported its exports unexpectedly shrink in October, badly missing expectations for growth.
      • China’s exports and imports fell in October in U.S.-dollar terms, according to customs data released Monday.
      • That decline missed Reuters expectations for growth in both categories.
      • China’s exports to the U.S. fell in October for a third-straight month.
• In Australia, the S&P/ASX 200 Index climbed 0.6% to close at 6,934 on Monday, rising for the second straight session, as firmer metals prices lifted shares of local mining stocks.  Bloomberg
   
• The US dollar index strengthened to around 111 on Monday.
  • The Buck recouping some losses from the previous session as it benefited from haven demand after China quashed hopes that it was planning to gradually ease Covid restrictions.
    • Traders also continued to assess the outlook for US interest rates, with a mixed US jobs report last week reinforcing expectations that the Federal Reserve will slow the pace of rate increases in December.
    • Markets are currently betting that the Fed will hike rates by 50 basis points next month after delivering four successive 75 basis point rate increases.
    • However, a hotter-than-expected US inflation report on Thursday would likely fuel bets for another 75 basis point rate hike and drive a fresh dollar rally.
    • The dollar gained across the board, with the most pronounced buying against the Chinese yuan and Australian and New Zealand dollars. FX news

• Crude oil  Brent futures fell more than 1% toward $97/bl as Chinese authorities reiterated their commitment to the stringent zero-Covid approach over the weekend.
  • The news dashing hopes for a policy pivot that was expected to revive demand in the world’s top crude importer.
  • A top health official in China defended the country’s current Covid controls, saying “previous practices have proved that our prevention and control plans and a series of strategic measures are completely correct.”
  • A tightening supply outlook also kept upward pressure on oil prices after OPEC+ agreed to reduce output by 2 million barrels per day in November, the largest cut since the start of the pandemic.
  • Moreover, the European Union ban on Russian oil set to take effect in December, adding to supply concerns. Gulf energy news
     
• Gold prices fell toward $1,670 an ounce on Monday, retreating from a three-week high reached in the previous session as the dollar rebounded slightly from Friday’s slump.
  • The yellow metal spiking on Friday after the Dollar took a surprise pounding vs the Risk complex.
  • Traders also continued to assess the outlook for US interest rates, while looking ahead to a key US inflation report this week that could influence the size of an expected Federal Reserve rate hike in December.
    • Markets are currently betting that the Fed will slow the pace of rate increases by delivering a 50 basis point rate hike next month after raising interest rates by an outsized 75 basis point in the last four meetings.
  • However, a hot inflation print would likely fuel bets for a larger 75 basis point increase, supporting the dollar while pressuring gold. Kitco metals report