View this email in your browser

Morning NOTE

GOOD MORNING

The ZAR weakened to 18.0100 on the back of Risk aversion as traders exited Dollar “shorts” ahead of today’s NFP report.

OPENING RATES

• USDZAR 17.9600
• EURZAR 17.6200
• GBPZAR 20.0800

SOUTH AFRICA

• Transnet declared force majeure at its ports on Thursday, according to a document seen by Reuters, as workers began an open-ended strike over wages.
  • Force majeure is when “ unforeseeable circumstances prevent someone from fulfilling a contract”.
  • Transnet operates SA’s freight rail network and all the country’s ports.
    • It said the strike action would have a profound impact on economic activity across all sectors.
    • It urged workers to consider the long-term consequences of the strike on themselves and the economy as a whole. EWN
       
• Heat wave and power outages hit Joburg water supplies
  • Residents across large swathes of the city and as far as Tshwane report interrupted water supplies.
  • A week ago Rand Water reported a power failure in the engine room at its Zuikerbosch Water Treatment Works.
    • The treatment plant supplies water to the Eikenhof and Mapleton booster pump stations. News24
       
• Major SA conglomerates continues to find solutions to the ESKOM problem.
  • After Anglo American announced plans to enter the renewables market,
  • Richards Bay Minerals also announced a 300GWh solar power partnership.
  • It will team up with international player Voltalia to build a power plant in Limpopo. Moneyweb
     
• Stage 4 load shedding to continue.

GLOBAL MARKETS

Stocks:

• US Stocks remained under pressure.
  • The Dow closed down 340 points and the S&P 500 and the Nasdaq declined roughly 0.9% and 0.7%, respectively.
  • Investors digested a slew of economic releases and the outlook for monetary policy.
  • On Friday , losses continued with Futures contracts all lower in Asian trading.
    • US stock futures again slipped on Friday after the major averages declined for the second straight session.
       
• Several Fed policymakers reaffirmed the central bank’s commitment to tame inflation by raising rates to a restrictive level.
  • Now all eyes are on the US September jobs report for further clues on the Federal Reserve’s rate-hike path.
  • Cleveland Fed Bank President Loretta Mester said the Fed has to be “singularly focused on inflation” .

Bonds:

• The US 10Y Treasury yield, which is a benchmark for borrowing costs worldwide, consolidated around 3.8%.
  • It was  not far from a 14-year peak of 4% touched in late September, as investors reassessed the outlook of tightening monetary policy.
     
• Several FED speaker reaffirming the FED’s commitment to rein in inflation even as growth slows.
  • Despite some evidence that price pressures are easing and the job market is starting to cool,
    • several Fed policymakers have reaffirmed their support for keeping monetary policy tight for some time.
       
• The next crucial catalyst this week will be the nonfarm payrolls report on Friday .
  • It will provide a more precise update on the labour market strength and wage pressures.

YESTERDAY

• The Dow declined 346 to 29,926
• The SP500 fell 38 to 3,744
• The Nasdaq declined 75 to 11,073

•  Image: Trading Economics

OVERNIGHT HEADLINES

Asian markets lower following a drop on Wallstreet .

• In Japan, the Nikkei 225 dropped 1% to 27,030, breaking a 4-day advance, as US Fed officials signaled determination in bringing down inflation with more rate hikes.
  • Central bank action making traders fearful that it could lead to a global recession.
  • Investors also braced for the monthly US jobs report that could offer new clues on the likely path for US monetary tightening.
  • Technology stocks led the market lower but nearly all other sectors declined.
     
• In Australia, the ASX 200 fell 0.5% to below 6,800 on Friday, ending a three-day rally and tracking losses on Wall Street.
  • The drumbeat of hawkish remarks from US Fed officials stoked fears about a potential recession.
  • Financial stocks led the decline, with the “Big Four” banks losing between 0.3% to 0.7%.
  • Heavyweight iron ore miners also fell, including BHP Group (-1%), Rio Tinto (-0.4%).
  • Still, the benchmark index is on track to finish the week higher, likely posting its second weekly gain in seven. Reuters
     
• The US dollar held its recent advance to above 112 .
  • The Buck underpinned by a drumbeat of hawkish remarks from Fed officials.
    • Today traders and investors look ahead to the pivotal monthly jobs report that could guide the central bank’s monetary decision in November.
  • The nonfarm payrolls report due later in the global day is expected to show that the US economy added 250,000 jobs in September.
    • Any surprises to the upside would reinforce bets for further monetary tightening and drive another dollar rally.
  • Cleveland Fed Bank President Loretta Mester said the Fed has to be “singularly focused on inflation” .
    • Thus echoing remarks from other central bank officials who sounded unequivocally committed to bringing down inflation with more rate hikes.
    • This would be even at the cost of higher unemployment and weaker growth.
    • The dollar held its gains against the euro, the sterling, the yen. FX news
       
• Brent crude oil traded near $94/bl, having rallied about 10% so far this week .
  • Traders citing OPEC+ production cuts as the chief drivers of price action.
  • OPEC+ agreed to cut output by 2 million barrels per day or about 2% of global supply.
  • It was the biggest output cut since the start of the pandemic.
  • Saudi Arabia said the group moved in response to rising interest rates in the West and a weakening global economy.
  • However, the Biden administration rebuked its decision and said it would explore options with the US Congress to reduce the cartel’s influence over energy prices.  Gulf Energy news
     
• Gold traded above $1,720/oz after falling as much as 1.4% in the previous session.
  • The Yellow metal whipsawing, by shifting views on the likely path for US monetary policy.
  • Still, the metal is up nearly 4% this week as it benefited from recent weakness in the dollar and Treasury yields.
  • Meanwhile, investors remained cautious ahead of today’s NFP report.
  • Moreover, Federal Reserve officials pushing back against speculations for a Fed pivot next year. KItco metals