Morning NOTE

GOOD MORNING

The ZAR continued to trade towards the weaker side of the range after US NFP surprised to the upside.

• USDZAR 16.9400
• EURZAR 17.1800
• GBPZAR 20.2700

SOUTH AFRICA   

• Ratings agency, Fitch affirmed its stable outlook and rating assessment on Thursday.
  • While, S&P Global unexpectedly revised its outlook on the country’s debt to positive, from stable, in May, but added South Africa’s position remains challenging.
• Phala-gate continues
  • SA National Assembly speaker Mapisa-Nqakula has declined a request by the main opposition to form a committee to investigate allegations of theft at President Cyril Ramaphosa’s game farm.
  • This comes weeks after reporting of the theft as well as allegations of large amounts of foreign currency stolen . EWN
• SA Flight prices, particularly on the busiest domestic route between Johannesburg and Cape Town, have spiked substantially following the collapse of Comair.
  • Comair accounted for as much as 40% of supply in the market.
    • Airlines have been accused of price gouging from all quarters but had fought back against the accusations.
  • A return to CPT-JHB is now set at R6k if you lucky enough to find one. Moneyweb
• Ramaphosa in his weekly address said he understands why South Africans are angry about the Eskom crises.
  • He said his administration remains intent on solving the crises.
  • Eskom continues with its load shedding policies citing insufficient capacity to provide power to the grid. NEWS24

GLOBAL MARKETS

Stocks:

• US stock futures fell on Monday as investors looked ahead to a busy calendar week.
  • inflation and consumer sentiment data, as well as Q2 earnings reports from big companies.
  • Futures contracts tied to the three major indexes all traded in negative territory.
    • The major averages ended mixed on Friday, with the Dow losing 0.15% and the S&P shedding 0.08%, while the Nasdaq Composite gained 0.12%.
    • Those moves came as a stronger-than-expected jobs report allayed fears of an economic slowdown.
  • The data confirming the FED’s case for continued aggressive tightening in the coming months to fight inflation.

Bonds:

• Bond yields remain supported after rising 18bps last week.
  • The yield on the 10-year rose to 3.08% on Friday, as traders assessed the Federal Reserve’s tightening outlook amid stronger-than-expected payroll data.
    • The jobs report cemented a 75bps raise in the fed funds at its July meeting.
  • Also, minutes from the FOMC’s June meeting indicated that policymakers agreed that monetary policy needs to be more restrictive to tame inflation, even if it hampers growth.
• Still, the 2-year, 10-year part of the yield curve remained inverted, reflecting an increase in short-term risk perception and often seen as an indicator that a recession could follow in one-to-two years.

ON FRIDAY

• The Dow declined46 to 31,338
• The SP500 declined 3.24 to 3.899
• The Nasdaq  added 13.96 to 11,635

Futures Trading:

• image : Trading economics

OVERNIGHT HEADLINES

• Asia: Shares in Asia mostly fell on Monday, with the Hang Seng and the Shanghai Composite sinking near 3% and 1.5%.

  • Traders citing news that China’s market regulator imposed fines on Alibaba and Tencent for not complying with anti-monopoly rules on disclosure of transactions.
  • In Japan, however  the Nikkei climbed about 1% to 26,812 trading at a near 2-week peak, on hopes for a political stability as the ruling party LDP boosted their majority in the upper house election.
    • The election was held two days after the assassination of former Prime Minister Shinzo Abe who was widely considered an influential figure in the ruling party.
    • Meanwhile, investors remained cautious ahead of corporate earnings reports and on concerns over rising new Covid cases.

• Crude oil  fell below $104/bl after posting a loss last week in volatile trading, as concerns about a global recession.

  • News of potential new virus restrictions in China outweighed persistent supply-side issues.
    • Prospects of a global recession that is expected to hurt energy demand continue to dominate market sentiment.
    • Rising virus cases throughout China and the discovery of a new Omicron subvariant in Shanghai also raised fears about the potential for wider lockdowns in the country.
  • In addition, the market remains nervous about plans by Western nations to cap Russian oil prices.
    • President Joe Biden is also scheduled to visit Saudi Arabia this week amid efforts to tame elevated energy prices that are weighing on the economy.  Energy News
    • Earlier, President Vladimir Putin warning further sanctions could lead to “catastrophic” consequences in the global energy market.

• Gold was hovered  around $1,740 /oz, near its lowest levels in over 9 months, as a towering dollar continued to dampen demand for the greenback-priced bullion.

  • Persistent concerns about global economic growth and an increasingly restrictive US monetary policy continued to lift the safe-haven dollar at the expense of other assets.
  • Friday showed robust US hiring in June, bolstering the Federal Reserve’s aggressive stance against inflation.
  • Atlanta Fed Bank President Raphael Bostic;
    • Until recently among the central bank’s most dovish policymakers, said Friday he “fully” supports another 75 basis point rate hike this month. Kitco metals

• The US dollar rose to around 107.4 on Monday, marching towards a fresh 20-year high.

  • The Buck rallying on the back of persistent concerns about global economic growth and an increasingly restrictive US monetary policy.
  • The Dollar benefitting from its role as a safe-haven currency and higher US rates.
  • Analysts cited elevated global inflation, Europe’s energy crisis and Covid-related uncertainties in China as some of the factors that are driving dollar inflows.
  • In addition, data released Friday showed strong jobs and hiring in June, confirming the Fed’s aggressive stance against inflation.
  • Investors are also bracing for US inflation data on Wednesday, as another strong reading would likely cement expectations for prolonged aggressive Fed tightening. FX news