Morning NOTE

GOOD MORNING

The ZAR consolidated near weaker levels after US inflation beat market estimates and once again printed higher than expected.

OPENING RATES

• USDZAR 16.1600
• EURZAR 16.9700
• GBPZAR 19.7200

SOUTH AFRICA   

Health Minister Joe Phaahla said that there has been a sharp uptick in COVID-19 infections in South Africa.

• Phaahla said three provinces were particularly affected, with Gauteng accounting for 53% of the positive cases, KwaZulu-Natal 23% and the Western Cape 11%.

More privatisation ?

• The White Paper on National Rail Policy was released on Wednesday with a host of plans for the country’s freight and passenger rail network.
• The white paper envisages improved state-owned freight and passenger rail operators through increased scope for private participation.
• Analysts welcomed the news as SOE continue to underperform and remains a drag on the SA tax payer. News 24

Eskom announced it would continue with loadshedding as the extra demand due to the onset of winter, which continues to place the grid under pressure.

• However, the  utility’s top management is confident that load shedding will be limited in the coming winter months.
• This is mainly due to the fact that three large generators will return from maintenance outages between now and the end of next month. Moneyweb

GLOBAL MARKETS

Stocks:

• Wall Street losses continued and deepened in the last hour of trading with the Dow closing down 260 points, the S&P 500 dropping 1.4%, and the Nasdaq sinking 3%.
  
  
  • Investors exiting long positions after stronger than expected inflation reading reinforced the view that the Federal Reserve may be forced to hike rates quicker tipping the economy into a recession.
  • The annual inflation rate in the US slowed to 8.3% in April, less than market forecasts of 8.1%, while core CPI, gained 6.2% compared to expectations of 6%.

Bonds:

• The yield on the 10-year US Treasury bounced back to 3.03% from an intraday low of 2.91% as investors digested hotter-than-expected consumer prices data.
  
  
  • Hawkish comments from, Fed Bank of Atlanta President Bostic said he’s open to “moving more” on rates if inflation persists at elevated levels.
  • Headline inflation eased to 8.3% but came above market expectations of 8.0%, signalling inflation may have peaked but its decline may take longer than previously thought.
  • Core inflation also slowed less than forecasted, and remained above the 6% mark, which doesn’t provide much relief to the Federal Reserve’s board. source: U.S. Department of the Treasury

YESTERDAY

• The Dow fell 326 points to 31,834
• The SP500  declined 65 to 3,935
• The Nasdaq  declined 373 to 11,634
• image : Trading economics

OVERNIGHT HEADLINES

• Asian markets all lower after US inflation disappointed to the upside.
  
  
  • In Japan, the Nikkei 225 fell 1.77% to 25,749, closing at their lowest in nearly two months, as investors digested higher-than-expected US inflation in April.
    
    
    • The rise in CPI toking worries among investors that elevated prices may persist and fuelling concerns about faster interest rate hikes.
      
      
      • Technology names led the market lower, with sharp losses from SoftBank Group (-8%),
      • also Toyota Motor shares fell 1.5% despite posting a record full-year net profit.
• Crude oil fell more than 1% to below $105/bl, and in turn gave back some gains after rallying 6% in the previous session.
  
  
  • Supply concerns driving prices higher and geopolitical tensions in Europe.
  • Oil have come under pressure this week on the back of fears that aggressive interest rate hikes could weigh on global demand and could lead to a possible recession.
  • Prolonged Covid lockdowns in the world’s top crude importer China also impacted the markets.
  • Oil prices jumped on Wednesday after Russia sanctioned 31 companies based in countries that imposed sanctions on Moscow.
  • The move created unease in the market at a time when Russian natural gas flows to Europe via Ukraine fell by a quarter.
• Gold consolidated around $1,850/oz, as investors assessed higher-than-expected US inflation data while remaining cautious about a potentially strong policy response from the Federal Reserve.
  
  
  • Investors bet on more aggressive central bank monetary tightening to rein in rising prices.
  • However, persistent inflationary pressures, concerns about a global economic slowdown and falling Treasury yields spurred some safe-haven inflows to the metal.
• US dollar, firmed up above the 104 mark on Thursday, hovering near a 19-year high after US inflation came in higher-than-expected,
  
  
  • The data keeping the Federal Reserve on course to tighten monetary policy aggressively.
  • The headline CPI in the US held close to a 40-year high at 8.3% in April, while the core CPI also came in above expectations at 6.2%.
  • The dollar has also been buoyed recently by haven demand due to economic uncertainties surrounding Europe and China,
  • In addition, with Russia’s war in Ukraine and Covid-induced lockdowns in China clouding the outlook.

• Crypto :

  • Bitcoin dropped below the $27,000 level as a recent sell-off in the cryptocurrency space continues.
  • The price of bitcoin was last down 8.76% to $26,848.20 as of 1:47 a.m.
  • Cryptocurrencies fell with stocks after consumer prices for the month of April jumped 8.3%, which was slightly higher than expected by economists polled by Dow Jones.

COVID-19 SOURCE https://www.worldometers.info/coronavirus/

Cases / Deaths / Recoveries

• WORLD 519,233,933 / 6,282,390 / 474,069,892
• USA 83,953,371 / 1,025,764 / 81,107,296
• SA 3,862,165 / 100,609 / 3,691,684