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Morning NOTE

GOOD MORNING

The ZAR recovered after open at 17.2400 , following a rapid decline to 17.4800 earlier in session.

OPENING RATES

• USDZAR 17.2700
• EURZAR 17.2800
• GBPZAR 19.8700

SOUTH AFRICA   

• COSATU said that it was deeply concerned by Putco’s intention to dismiss 1,000 bus drivers after they embarked on a wildcat strike
  • The bus drivers said that they were not backing down from their unprotected strike at the bus company’s Pennyville offices.
  • Putco suspended its bus services after drivers refused to show up for work last week.
  • About 1,000 employees are expected to lose their jobs after they were given an ultimatum to return to work on Wednesday or face disciplinary action. EWN
• Locally, The JSE FTSE All Share index fell 1.2 to close at 66,716 on Wednesday.
  • The index led lower by commodity-linked sectors and financials, amid persistent worries about the global economic outlook.
  • Domestically, investors continued to digest the latest GDP data, which showed that South Africa’s economy contracted in the Q2.
  • The country’s worst-ever power cuts continues to place the economy on the back foot. BLOOMBERG
• Former ANC deputy president Kgalema Motlanthe has once again warned his party of losing favour with the electorate.
  • The former leader, said that December’s national conference must address how corrupted the internal contest has become.
  • He is currently heading up the ANC’s electoral commission. EWN
• The City of Tshwane has cut power to more than 400 homes on a Pretoria golf estate.
  • The homeowners owe the City more than R16 million due to illegal electricity connections.
  • The crackdown comes as the City attempts to settle its R1.6-billion debt with Eskom. News 24

GLOBAL MARKETS

Stocks:

• US markets extended a rebound in afternoon trading on Wednesday.
• The benchmark Dow adding more than 400 points, and both the S&P 500 and the Nasdaq over 1.5%.
  • The rally sparked by a decline in Treasury yields and a sharp fall in oil prices.  
  • The yield on the 10-year Treasury note fell below 3.3%, halting a rally toward multiyear highs while crude markets dropped to over 7-month lows.
• Investors seemed relieved after Fed Vice Chair Lael Brainard warned about the risk of interest rates going too high.
  • She also reassured markets that the central bank would continue fighting inflation for as long as needed.

Bonds:

• The 10-year US Treasury note yield declined to 3.23%, , as investors reassessed the outlook for monetary policy as the Federal Reserve seeks to rein in soaring inflation.
  • Comments by Fed speakers providing some relief but the only speech of significance will be Powell this afternoon.
  • The FOMC  hiking interest rates further even as growth slows.
  • The labour market has remained robust and remains supportive of FED policies.  
  • Rate markets are now pricing another supersized 75 basis-point interest rate hike in September.

Rate Hikes

• Earlier markets witnessed another jumbo interest rate hike from the Bank of Canada.
• The BOC  raised the target for its overnight rate by 75bps to 3.25%, pushing borrowing costs to the highest since 2008.

YESTERDAY

• The Dow added 435 to 31,591
• The SP500 added 71 to 3,979
• The Nasdaq rallied 246 to 11,791

• Image: Trading Economics

OVERNIGHT HEADLINES

• Asian markets rallied strongly following a rebound on Wallstreet.
  • In Japan, the Nikkei 225 rallied 2.31% to close at 28,065, following a broad rebound on Wall Street.
    • The move on the back of a pullback in the dollar and Treasury yields.
    • Investors also shrugged off hawkish commentary from some US Federal Reserve officials, while remaining cautious about recession risks and rising interest rates.
    • Moreover, markets continued to track sharp declines in the yen, as a weaker currency boosts the profits of export-heavy Japanese companies
  • In Australia, the ASX 200 jumped 1.77% to close at 6,849 on Thursday, rebounding from seven-week lows, as Australian technology stocks tracked a rally in US peers amid a pullback in the dollar and Treasury yields.
    • Financial stocks advanced as well, with the “Big Four” banks rising between 1.1% to 2.8%.
       
• Oil Prices Tumble More Than 5%.
  • Oil prices fell about 5% to their lowest level since January, with WTI trading below $82 per barrel amid persistent concerns about sluggish demand and a dollar surge.
  • Weak customs data from top importer China and renewed coronavirus-induced restrictions in several cities threatened further economic damages and subdued fuel consumption.
  • On top of that, lingering global growth concerns amid anticipation of an extended period of tightening financial conditions continued to rattle sentiment.
  • Meanwhile, OPEC+ unexpectedly agreed to cut output by 100,000 barrels a day from October, with Saudi Arabia signalling further action.
     
• Gold recovered after a fall in the US dollar.
  • Gold prices rallied strongly to open above $1,720/oz, as caution dominated sentiment ahead of Jerome Powell’s speech and the ECB’s interest rate decision.
  • Powell will speak at the Cato Institute conference later in the global day, offering what could be his last public remarks until the Sept. 20-21 policy meeting.
  • Elsewhere, the ECB is expected to deliver a 75 basis point rate hike later today, pushing borrowing costs to the highest since November 2011 .
  • The ECB continues to try get inflation under control despite a deepening energy crisis that heightened recessionary risks.
  • Gold is trading less than 3% above its lowest levels in over two years, having also lost its shine as a hedge against inflation and economic uncertainty as rising interest rates dented bullion demand.
     
• The US dollar fell sharply to trade below 110 on the back of a fall in US yields.
  • The Greenback hovering close to a 20-year high hit in the previous session, as investors wait Powell’s speech for more clues on the central bank’s rate hike path.
  • Earlier Fed Vice Chair Lael Brainard stressed the need to bring rates to restrictive levels to get inflation under control.
  • Markets are currently leaning towards another 75 basis point rate hike at this month’s meeting, which would bring the fed funds rate to 3%-3.25%.
  • Meanwhile, traders also await the European Central Bank’s policy decision later today, where it is expected to move more aggressively to tackle inflation despite mounting recession risks.