Morning NOTE

GOOD MORNING

The ZAR consolidated in thin holiday trade ahead of today’s key US CPI report.

• USDZAR 16.6200
• EURZAR 16.9700
• GBPZAR 20.0700

SOUTH AFRICA   

• News have emerged that only $600,000 was stolen from Ramaphosa’s farm and not the $4million as reported.
  • The news ahead of efforts to get Ramaphosa to testify in parliament. EWN
• Eskom has submitted a tariff restructuring application to the National Energy Regulator of South Africa (NERSA).
  • At this stage, the utility has not indicated how much tariffs could be raised. The new tariffs will come into effect in April. News 24
• US Secretary of state pledged to work closer with Sub-Saharan Africa after acknowledging the strong influence of China and Russia in the region.
  • The US unveiled a new strategy to forge closer relations with sub-Saharan Africa,
  • With one of the world’s fastest-growing populations, largest free-trade areas by geographical area and most diverse set of ecosystems.
  • The US noted Africa has a critical role to play in addressing the world’s defining challenges. Moneyweb
• Green shoots appearing in the travel and leisure sector, after Southern Sun, announced they were optimistic about the hospitality industry.
  • For the first time in two years, “…We are out of survival mode into recovery mode. I can finally feel that positivity…”  Business day

GLOBAL MARKETS

Stocks:

• US equity futures were flat as investors braced for the key inflation report that could affect the outlook on the Federal Reserve’s rate hike path.
  • Futures contracts tied to the three major indexes were all near breakeven.
• In regular trading on Tuesday, the Dow fell 0.18%, the S&P 500 lost 0.42% and the tech-heavy Nasdaq dropped 1.19%.
  • Those moves came as major technology firms warned of a grim outlook due to a challenging macro environment and weakening demand.
• Meanwhile, the annual inflation rate for July is expected to have cooled to 8.7% from 9.1% in June.
  • A significant surprise on either side could inform how aggressively the Fed would tighten going forward.
• Adding to worries were repots that Elon Musk sold TESLA shares and in turn raising $6.88bn

Bonds:

• The US 10YT traded below 2.8% at 2.79%. Yields are up higher from the 4-month low of 2.5% hit on August 2nd.
  • The spike in yields as investors bet the Fed will raise interest rates by 75 basis points for the 3rd straight month in September.
    • The NFP report showed the economy is resilient ahead of the key inflation report on Wednesday.
    • It also ended recent speculation about a dovish policy pivot.
  • Signs of a robust job market came along with hawkish comments from several Fed policymakers.
    • The central bank has been reassuring markets that it remains fully committed to taming inflation, currently running at 40-year highs.

YESTERDAY

• The Dow fell 58 to 32,774
• The SP500 declined 17 to 4,122
• The Nasdaq  fell 150 t0 12,493

Futures Trading:

• image : Trading economics

OVERNIGHT HEADLINES

• Asian markets all tracking Wall street lower after investors booked profits ahead of today’s key CPI report.
  • In Japan, the Nikkei 225 Index fell 0.65% to close at 27,819, as Japanese technology stocks tracked overnight losses on Wall Street.
    • Fed worries as well as disappointing updates from major US tech firms dented the outlook for the sector.
    • Investors are also bracing for US inflation data that could throw light on how aggressively the Federal Reserve would tighten going forward.
  • In Australia, the ASX 200 Index fell 0.53% to close at 6,993, retreating from two-month highs, weighed down by sharp losses in technology stocks.
    • The dairy producer’s shares sank 6.9% and 7.5% at the Australian and New Zealand exchanges, respectively.
    • Australian technology firms also tracked their Wall Street peers lower, with sharp losses from Computershare.
• Crude oil  futures flat-lined near $90/bl, remaining under pressure after an industry report showed that US crude inventories unexpectedly rose last week.
  • It was another sign of weakening demand.
  • US crude stockpiles rose by 2.156 million barrels in the week ended August 5, defying expectations for a small 400,000 barrel drop.
    • And it followed on surprise build of 2.165 million barrels in the preceding week.
  • Investors also assessed the potential for additional supplies from Iran after the EU submitted a “final text” to revive the 2015 Iran nuclear deal late on Monday.
    • The deal is currently awaiting approval from Washington and Tehran. Energy news
• Gold held steady above $1,790/oz on Wednesday after rising for 2 straight sessions to its highest in a month.
  • Investors geared up for US inflation data that could throw light on how aggressively the Federal Reserve would tighten going forward.
  • Economists expect the annual CPI to have eased to 8.7% in July from 9.1% in June, and a significant downward surprise.
  • This could ease some pressure from the Fed and drive gold prices even higher.
  • Markets are currently priced for a third straight 75 basis point rate hike at the US central bank’s next policy meeting in September. Kitco metals
• The US dollar flatlined around the 106 mark after facing some pressure in the previous 2 sessions.
  • Traders are hesitant in making big bets ahead of US CPI data that could influence the Federal Reserve’s policy stance.
  • Analysts expect the annual inflation rate to have eased to 8.7% in July from 9.1% in June,
    • A drop could reduce some pressure on the Fed and drive the greenback even lower.
    • On the other hand, a hotter-than-expected reading will reinforce the central bank’s aggressive stance against runaway inflation and likely trigger another dollar rally.
    • Markets are currently priced for a third straight 75 basis point rate hike at the US central bank’s next policy .  Forex news