Morning NOTE

GOOD MORNING

The ZAR strengthened dramatically after US CPI data printed lower than expected, resulting in a global risk asset rally.

• USDZAR 16.2200
• EURZAR 16.6900
• GBPZAR 19.7900

SOUTH AFRICA   

• The Constitutional Court dismissed Ace Magashule  last legal bid to get his suspension as the party’s secretary-general overturned.
  • The court explaining that there is no reasonable prospect for success.
  • Magashule wanted his suspension declared unlawful invalid and unconstitutional.
  • If successful like Mkhize they were seen as potential candidates to usurp Ramaphosa at the year end ANC congress. EWN
• Sasol has announced a 96% increase in the price of piped gas, to R133,34 per gigajoule (GJ).
  • Industrial gas users say this poses a huge risk to the economy.
    • The price hike would cost South Africa R325 million per month as of 1 August 2022, warned industry body the Industrial Gas Users Association of Southern Africa (Igua-SA).
  • In conversation with Bruce Whitfield, Igua-SA CEO Jaco Human accuses Sasol of price gouging. Moneyweb
• Johann Rupert, the chairman of Richemont won’t give in to activist shareholder Bluebell Capital Partners’ campaign to overhaul the boardroom structure at the world’s second biggest luxury group.
  • Rupert, who owns all the non-listed category B shares in the company, which represent 9.1% of the capital, but 50% of the voting rights,
  • ….said there was no reason to change the board “either legally or morally.”
• Zimbabwe’s Minister of Foreign Affairs and International Trade, Frederick Shava, has called on Zimbabweans based in South Africa to respect the host nation’s laws and shun crime.
  • He added Zimbabwe remains ready to welcome back its citizens after the expiration of the Zimbabwe Exemption permit. IOL

GLOBAL MARKETS

Stocks:

• In regular trading on Wednesday, the Dow gained 1.6%, the S&P 500 jumped 2.1% and the Nasdaq Composite surged 2.9%.
  • Leaving all three benchmarks closing at their highest in over three months.
  • The moves on the back of  the softer headline inflation number that came in at 8.5% in July.
  • CPI decelerating from an over 40-year high of 9.1% in June, prompting speculations for peak inflation and a less aggressive Fed.
• US stock futures climbed higher on Thursday after the major averages rallied sharply in the last regular session.
  • Futures contracts tied to the three major indexes each rose about 0.2%.
  • In after-hours trading, Disney jumped nearly 7% on strong earnings and higher-than-expected Disney+ subscription numbers.

Bonds:

• The yield on the US 10-year note declined sharply to the 2.7% level.
  • The yield approaching the four-month low of 2.5% hit earlier in the month on the back of  lower than expected inflation figures.
  • The data eased worries that the Fed will extend its aggressive tightening pace.
    • Consumer prices in the US rose 8.5% annually in July, lower than expectations of 8.7% and previous of 9.1%.
  • It was quite a snap back after backtracking hawkish bets after last week’s hot payroll data.
  • Hopes that the rise in consumer prices have peeked drove investors to reconsider the Fed’s dovish policy pivot.

YESTERDAY

• The Dow added 476 to 33,309
• The SP500 added 70 to 4,210
• The Nasdaq  added 360 to 12,854

Futures Trading:

• image : Trading economics

OVERNIGHT HEADLINES

• Asian markets broadly higher across the region on the back of lower US inflation data, markets however pairing gains after hawkish comments from FED governors.
  • In Australia, the S&P/ASX 200 Index jumped 0.8% to above 7,030, hitting its highest levels in over two months.
    • Nearly all sectors participating in the rally following overnight gains on Wall Street  on the back of softer-than-expected US inflation data.
    • The data raising hopes for a less aggressive Federal Reserve. High-growth technology and clean energy-related names led the advance.
    • Other index heavyweights also gained, including BHP Group (1.8%), Telstra (0.6%) and ANZ Bank (0.9%).
  • In  China, the Shanghai Composite rose 0.3% to around 3,240, recouping some losses from the previous session.
    • Traders also citing the better-than-expected US inflation report and speculations for a less aggressive Federal Reserve and spurred a broad rally in risk assets.
• Crude oil WTI crude declined to $91/bl after official data showed that US crude inventories rose much more than expected.
  • Demand concerns continues to pressure prices.
  • EIA data showed that US crude stockpiles expanded by 5.5 million barrels last week, much higher than the 73,000-barrel increase expected by analysts.
  • Flows on the Russia-to-Europe Druzhba pipeline also resumed earlier this week as a payment dispute was resolved, easing supply concerns further.
  • Oil prices are still up about 3% so far this week, but remain near six-month lows after having erased all the gains seen since Russia invaded Ukraine.
• Gold prices rallied above $1,790/oz after the softer US CPI data.
  • The yellow metal however retreating as traders booked profits following  hawkish remarks from Federal Reserve policymakers.
  • The metal jumped initially on before reversing towards the close after Fed officials signalled resolve in raising interest rates aggressively to convincingly tame inflation.
  • Although gold is widely considered as a hedge against inflation and economic uncertainty, higher interest rates raise the opportunity cost of holding non-yielding bullion.
• The US Dollar recovered toward 105.5 on Thursday after sliding 1% in the previous session.
  • The slide on the back of weaker US CPI but traders assessed hawkish remarks from Federal Reserve policymakers, resulting in a dollar bounce.
  • In the latest developments, San Francisco Fed President Mary Daly warned in an FT interview that it is too early to “declare victory” in the fight against inflation.
  • She added that consumer prices remain “far too high and not near our price stability goal.”
  • Those remarks came as the headline inflation rate slowed to 8.5% in July 2022 from an over 40-year high of 9.1% in June amid a significant drop in gasoline prices.
• The Euro jumped to $1.0370, a level not seen in a month.
  • The rally supported by a slightly weaker dollar after US inflation rate came below forecasts in July, easing expectations of an aggressive Fed rate hike next month.
  • Bets on rate hikes from the ECB for the end of the year were also lowered but the ECB is still seen raising borrowing costs by another 50bps in September.
  • Despite the gains, the common currency holds close to parity.
    • ~ concerns of a looming economic crisis in Europe persist as inflation shows no signs of peaking and the energy crisis is far from over.