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Morning NOTE

GOOD MORNING

The ZAR endured a volatile session on Friday on the back of comments about the SARB by the ANC as well as the latest NFP report.

OPENING RATES

• USDZAR 17.0600
• EURZAR 18.2100
• GBPZAR 20.7200

SOUTH AFRICA

• ESKOM  crises continues as the SOE announced stages 3 and 4 to continue “ until further notice”.
  • The power utility continues to struggle as it battles breakdowns, maintenance issues as well as sabotage.
  • The ageing power fleet deteriorating at an alarmingly fast rate. IOL
• In addition, it has emerged on the weekend that,
  • Eskom CEO Andre De Ruyter survived a murder attempt at his office in Megawatt Park, where he drank a cup of coffee laced with cyanide.
  • De Ruyter confirmed the attempt on his life, which took place on Tuesday 13 December 2022.
  • It was a day after he submitted his resignation as CEO to the Eskom chairman, Mpho Makwana, but before this became publicly known on 14 December 2022. EWN
• After securing re-election at the ANC’s December elective conference,
  • ANC president Cyril Ramaphosa on Sunday promised sweeping initiatives and interventions in a bid to restore public confidence in the beleaguered party’s ability to govern.
  • He announced a host of new initiatives as he fights to revive the party itself ahead of the 2024 national and provincial elections. EWN
• The Health Department said it was still gathering information to give a more conclusive report on the newly detected highly transmissible variant of COVID-19 – XBB.1.5
  • University of Stellenbosch, Professor Tulio de Oliveira said in a tweet on Friday that the variant was discovered in the Western Cape,
    • following gene sequencing carried out from a 27th of December sample.
    • The World Health Organization (WHO) says the sub-variant called xbb. 1. 5 has been detected in 28 other countries with the strain being more dominant in the United States.
    • It’s yet to be identified in China, which is undergoing a surge in infections after relaxing strict controls, which limited the effect of previous waves of COVID-19 in the country. NEWS24

GLOBAL MARKETS

Stocks:

• US stock futures edged higher on Monday after the major averages notched their biggest one-day gain so far this year during Friday’s session.
  • Markets taking off after a slowdown in wage growth and a surprise contraction in services activity in the US tempered expectations that the Federal Reserve will continue to hike rates aggressively.
• The SP500 trading above 3900 as traders start to warm to the idea of a risk rally in 2023.

Bonds:

• The US 10-year Treasury yield  fell by 15bps to 3.6% on Friday, the lowest in three weeks, as investors digested a batch of fresh economic data for hints on the outlook of the Fed’s monetary policy.
• US wage growth unexpectedly slowed in December and earnings for previous months were revised sharply lower.
• Also, ISM data showed that factory orders contracted more than expected, while service activity unexpectedly declined.
  • NB ; the Service sector remained a concern for various Fed governors, including Ralph Bostic of Atlanta, a furter decline could be significant for future Fed cycles.

ON FRIDAY

• The Dow gained 700 points to 33,630
• The SP500 added 86 to 3,895
• The Nasdaq  added 264 to 10,569

•   Image: Trading Economics

OVERNIGHT HEADLINES
 

• The US dollar index slipped toward 103.5 on Monday, extending a sharp decline in the previous session.
  • Weaker-than-expected US data released last week sparked hopes that the Federal Reserve would slow the pace of its interest rate hikes.
  • The Dollar weakened across the board as risk sensitive currencies like the Aussie and Kiwi all gained against the buck.
  • The drop in the dollar under pinned by the drop in US yields as inflation expectations continue to drop.  Fx news

• Asian equity markets jumped on Monday, tracking Wall Street higher.
  • US data showed a slowdown in wage growth and a surprise contraction in services activity, resulting in tempered expectations that the Federal Reserve will continue to hike rates aggressively.
    • China’s continued reopening also bolstered the outlook for the global economy. Shares in Australia, Hong Kong and China rose, while Japan is closed for a holiday.
    • In Japan, the Nikkei 225 rose 0.59% to close at 25,974, rising for the second straight session as investors scooped up shares of beaten-down Japanese companies. Reuters
       
• Crude oil WTI traded  above $74 /bl, rebounding further from three-week lows.
  • Prices supported by hopes of further demand recovery in China and the prospect of a less aggressive monetary tightening from the Federal Reserve.
  • Guo Shuqing, party secretary of the People’s Bank of China, said on Sunday that China’s economic growth will quickly rebound and return to its “normal” path.
    • This as the government provides more financial support to households and private companies to help them recover from the Covid-induced slump.
  • Top hedge fund manager Pierre Andurand suggested that oil prices could exceed $140/bl year if Asia fully reopens after Covid-related lockdowns, as reported by Bloomberg.
    • In the US, a slowdown in wage growth and a surprise contraction in services activity tempered expectations that the Fed will continue to hike rates aggressively, adding to the bullish case for oil. Gulf energy news
       
• Gold rallied to around $1,880/oz on Monday, reaching its strongest levels in eight months.
  • Bullion higher on the back of general dollar weakness, as a slowdown in wage growth and a surprise contraction in services activity in the US tempered expectations.
  • ISM data also showed that US services sector activity unexpectedly contracted in December at the steepest pace in 2-½ years amid weakening demand.
  • Meanwhile, minutes of the FOMC’s December meeting showed that policymakers committed to pushing rates higher
    • and holding them at a restrictive level until there were clear signs that inflation was easing. Kitco metals report