Morning NOTE

GOOD MORNING

The ZAR weakened to  16.2575  before recovering in overnight trading to open at 16.1200.

• USDZAR 16.1300
• EURZAR 17.0500
• GBPZAR 19.9400

SOUTH AFRICA   

• Eskom announced on Monday afternoon that it will implement stage 2 load shedding from 5 pm until 10 pm.
  • South Africans got a temporary relieve when power cuts, suspended on Saturday due to improvements in the generation capacity.
  • However, Eskom said South Africans should anticipate more power cuts this week as the increase in electricity demand is overwhelming its system, especially during peak hours. EWN
• Eastern Cape ANC chairperson Oscar Mabuyane said Cyril Ramaphosa had championed renewal of the governing party and he must be given another five years to focus on this task.
  • He also said the EC ANC, will work hard to ensure Ramaphosa is once again elected as ANC president. IOL
• Democratic Alliance (DA) leader John Steenhuisen on Monday defended his recent visit to Ukraine, saying he wanted to witness the destruction with his own eyes.
  • He said the war should be condemned by the South African government and that it would have a lasting impact on the South African economy.
  • Steenhuisen cited that SA was heavily reliant on Ukrainian wheat and other products. News24
• South Africa’s COVID-19 positivity rate has soared by up to 31.1%, this is the highest positivity rate in recent months.
  • The notable increase comes after more than 8,500 new infections were recorded across the country in the last 24 hours.
  • Yesterday, SA reported 7 more deaths, setting the total at 100,523
  • Health officials sounding the alert ahead of what promises to be a heavy winter-flu season.

Stocks:

• Wall Street’s sell-off accelerated in the final hour of trading with the Dow closing down 653 points below the 4000 level and the S&P 500 and Nasdaq plunging 3.2% and 4.3%.
  • The moves respectively, pushing the 3 major indexes to levels not seen in over a year.
  • Investors have been increasingly concerned about the implications of tighter global monetary policy on the growth momentum.
  • Adding to the sour mood were signs of slowing economic activity in China, due to its lockdown policy.
• This morning we see a recovery in Asian stocks on the back of some profit-taking ahead of tomorrow’s key US CPI report.

• The yield on the 10-year US Treasury topped 3.2%, a level not seen since November 2018, as investors digest the narrative of a looming policy tightening cycle against a backdrop of slowing global growth.
  • The Federal Reserve hiked its benchmark policy rate by half a percentage point for the first time since 2000, while markets are now pricing in a more than 75% chance of a 75 bps hike in June.
  • With inflation running at 40-year highs and the job market extremely tight, the FED is being forced to change the narrative and signal a faster tightening. source: U.S. Department of the Treasury

• The Dow  fell 653 points to 32,245
• The Sp500 declined 132 to 3,991
• The Nasdaq  fell 521 to 11,623

• Asian markets were not spared after Wallstreet sold off aggressively following a global central bank commitment to fight inflation and raise interest rates.
  • In Japan, the Nikkei 225 fell 1.5%, reaching its lowest level in nearly two months.
    • The index tracking a sharp sell-off on Wall Street as worries about higher interest rates and their impact on economic growth dented risk appetite.
    • Rising interest rates have particularly pressured technology names, with sharp losses from SoftBank Group (-3.9%)
    • Resource-related stocks also declined, after commodity prices tumbled overnight.
• Crude oil fell as demand concerns resurfaced, with the US WTI falling more than 6% to trade at $102.80/bl.
  • Traders citing price pressure from a stronger dollar and concerns about weakening global demand as China continues to intensify lockdowns.
  • Recent customs data showed that crude imports by the world’s second-largest economy fell 4.8% in the first four months of 2022 compared with last year.
  • Talks of the potential for a recession if central banks go too far also cited as a risk to crude oil demand. Energy News
• Gold traded at $1860/oz after a 3-week decline. Bullion remaining under pressure from a strong dollar and rising Treasury yields.
  • Traders continued to bet on further Fed hikes to bring decades-high inflation under control, even at the risk of some economic pain.
  • The metal is down more than 6% from its April high as the dollar traded at its highest in 20 years against a basket of major currencies.
  • Fed chair Powel assured Americans that the central bank will do what it takes to curb surging inflation, while acknowledging that this could risk economic pain.
• On the industrial metals side;
  • Copper futures trade below the $4.2/tonne mark. It was a level not seen last December and down roughly 20% from a record peak of $5 touched in early March.
  • Traders citing the coronavirus-induced lockdowns in top consumer China sparking off concerns about demand and growth.
  • Customs data showed that China’s copper imports in April fell 4% from the same month a year earlier, as lockdowns hurt manufacturing activity and consumption.
  • Pressuring prices further was the continued appreciation of the US dollar, making the metal more expensive for holders of other currencies. TE
• The dollar index rose above the 104 mark on Monday, hitting a fresh 20-year high.
  • Investor expectations of further Fed monetary tightening to combat inflation and fears of slowing global economic growth drove investors into the safety of the dollar.
  • Traders now look ahead to fresh inflation data due on Wednesday to gain insight on the central bank’s possible next steps.
  • Futures markets are pricing a 75% of a 75 basis point rate increase at the Fed’s next meeting in June and more than 200 basis points of tightening by year-end.

• Safe haven

  • Uncertainties surrounding the outlook for inflation,
  • The war in Ukraine and Chinese lockdowns were among the factors that spurred safe-haven demand for the dollar. FZ news

• Biden tells top national security officials leaks about intelligence sharing with Ukrainians must stop.
  • Last week, after the White House denied providing direct intelligence to Ukrainians “with the intent to kill Russian generals,”
  • He told them that it was not helpful for information to become public about what the US was sharing with the Ukrainian forces fighting the Russian invasion. CNN
• On Russia’s annual Victory Day, President Vladimir Putin reiterated his accusation that the West left him no choice but to invade Ukraine.
  • He offered few clues on the direction of the conflict and planned air shows were cancelled.
  • Russia celebrates the end of WW2 and the defeat of the NAZI’s as a matter of national pride every year. CNBC

• The city of Odesa, Ukraine, has come under further missile attacks Monday evening local time.

  • Around 10 p.m. local time (3 p.m. ET), witnesses in the center of the city said they heard several large explosions which shook buildings.
  • Ukraine accused Russia of dropping a bomb on a school Saturday in the Luhansk region where people were taking shelter. At least 60 people are feared dead. Reuters

• WORLD 517,558,877 / 6,277,421 / 472,328,072
• USA 83,605,455 / 1,024,628 / 80,974,128
• SA 3,844,625 / 100,533 / 3,680,855