Morning NOTE

GOOD MORNING

• USDZAR 16.0100
• EURZAR 16.7900
• GBPZAR 19.6400

SOUTH AFRICA   

• With most of the country facing rain this week, including the Western Cape.
• It appears KZN is once again hit hardest.
  • KZN Premier Sihle Zikalala announced on Sunday that the death toll from the April and May floods has risen to 461.
    • He was giving an update on the provincial government’s response to the damage caused by the disastrous floods.
    • He says 23 bodies remain unidentified.
    • Zikalala visited the families who have been moved to the 206 temporary residential units.
    • More than 6,000 people are still homeless as more than 8,000 houses were totally destroyed by the floods. EWN
• The pressure continues to build on the NPA regarding the arrest of the Gupta brothers.
  • The National Prosecuting Authority (NPA) has less than 50 days to formally charge Atul and Rajesh Gupta.
  • The NPA needs more state capture offences if it wants them to face more than just the R24.9 million Nulane scam prosecution.
  • The terms of South Africa’s extradition agreement with the UAE states they can only be extradited if they have been charged with or convicted of an extraditable offence.
• SA President Cyril Ramaphosa’s attempts to address parliament descended into chaos this week as opposition party members hurled insults at him and tried to stop him speaking.
  • The scenes reminiscent of the treatment faced by his scandal-dogged predecessor, Jacob Zuma.
  • Lawmakers from the radical EFF held up proceedings for more than an hour on Thursday and over three hours on Friday, before being bundled out of the chamber by burly security guards or removed from an online platform.
  • Their protest followed revelations that former spy chief Arthur Fraser laid charges against Ramaphosa for concealing the theft of more than $4 million from his game farm in February 2020. Moneyweb

GLOBAL MARKETS

Stocks:

• U.S. stock futures fell early Monday morning as Wall Street struggles to recover from one of its worst weeks of 2022.
  • Futures tied to the Dow Jones Industrial Average dropped 330 points, or 1.05%. Nasdaq 100 futures tumbled 1.88%, and S&P 500 futures fell 1.42%.
  • The major averages last week posted their biggest weekly declines since late January. The Dow and S&P 500 fell 4.6% and 5.1%, respectively, while the Nasdaq Composite lost 5.6%.
  • A chunk of those losses came Friday, when hotter-than-expected U.S. inflation data spooked investors.
• The Dow dropped 880 points, or 2.7%. The S&P 500 and Nasdaq lost 2.9% and 3.5%, respectively.
• The U.S. consumer price index rose last month by 8.6% from a year ago, its fastest increase since December 1981.
  • The index topped economists’ expectations.
  • In addition, the core CPI, which strips out food and energy prices, also came in above estimates at 6%. Reuters

• U.S. Treasury yields surged Monday morning, led by short-term rates, as traders reacted to hotter-than-expected inflation data last week and contemplated a possible recession.
• The US10YT traded at 3.17% yield up from 3.00% before the data release.
• With energy accounting for a nearly 36% on the basket increase, higher oil prices continues to be a problem. CNBC

• Food inflation:

  • In addition, Food prices have been on the rise in the past few months, and export bans have followed.
    • Rice could be next in line.
    • The UN  Food and Agriculture Organization Food Price Index already shows international rice prices creeping up for the fifth straight month to reach a 12-month high. Bloomberg

• The Dow lost 880 points to 31,392 (-2.73%)
• The SP500 116 points to 3,900  (-2.91%)
• The Nasdaq lost 414 to 11,340  ( -3.52%)

• image : Trading economics

• Asian markets sharply lower following the drop on Wallstreet. Investors spooked by the higher than expected US CPI data.
• Across the board risk assets declined.
  • In Japan, the Nikkei 225 fell 3% to 26,987, closing at the lowest levels in two weeks and tracking losses on Wall Street.
    • Traders citing a hotter-than-expected US inflation data stoked fears of more aggressive rate hikes from the Federal Reserve.
    • Japanese technology stocks led the market sell-off, with sharp losses from SoftBank Group (-6.9%).
  • Australia also following global markets lower with, the ASX Index fell 1.25% to 6,932 on Friday.
    • The index closing at its lowest level in four months and marking its worst week in more than two years.
    • Aussie tech firms traced a weak lead from Wall Street, with sharp losses from Block Inc (-6.2%), Computershare (-1.3%).
• Brent crude declined nearly 2% to below $120 per barrel on Monday, sliding for the third straight session.
  • Traders citing the prospect of higher US interest rates to combat surging inflation and the potential for more Covid curbs in China, and that it could lead to a drop in demand.
    • US inflation unexpectedly accelerated to a fresh 40-year high of 8.6% last month, raising the likelihood of more aggressive rate hikes from the Federal Reserve.
    • US gasoline prices also averaged more than $5 a gallon for the first time on Saturday, extending a surge in fuel costs that is driving rising inflation.
    • Goldman Sachs reiterated on Friday that energy prices need to rally further before achieving the demand destruction required for market rebalancing.
  • In the US, WTI crude futures fell nearly 2% toward $118 per barrel on Monday, sliding for the third straight session. Energy news
• Gold declined to 1,863, after hitting $1,870/oz and easing from a one-month high hit earlier in the session.
  • The rally on the back of as red-hot US inflation data lifted the dollar and Treasury yields and dented demand for the safe-haven bullion.
  • Gold also briefly disconnected itself from moving inversely to the dollar on Friday as risk aversion dominated markets amid concerns over a potential blow to the US economy from aggressive monetary tightening.
  • The CPI data served as a wake-up call to financial markets that inflation remains entrenched and has real upside risks. KITCO METALS
• The US Dollar reasserted itself on the back of rising US yields.
  • The Greenback traded at 104.5 closer to its highest levels in 20 years and  boosted by higher-than-expected US inflation data.
    • US consumer prices unexpectedly accelerated to a fresh 40-year high of 8.6% in May, raising the likelihood that the Federal Reserve would continue with its 50-basis point rate hikes through September to combat inflation.
  • The Fed is expected to deliver its second straight half-point rate increase when it meets on Wednesday.
    • Investors will also be watching moves from other major central banks, with the Bank of England set to lift interest rates again, while the Swiss National Bank prepares to start its tightening cycle.
  • Meanwhile, the Bank of Japan is expected to retain its ultra-dovish stance despite a rapidly falling yen. FX NEWS

INFLATION

• U.S. Treasury yields surged Monday morning, led by short-term rates, as traders reacted to hotter-than-expected inflation data last week and contemplated a possible recession.
• Fed policymakers judged that 50 basis point increases in the target range for the fed funds rate would likely be appropriate at the next couple of meetings.
• The minutes from the last FOMC meeting in May showed, members also noted that a restrictive stance of policy may well become appropriate depending on the evolving economic outlook, seen as highly uncertain.
• The central bank added that ongoing increases in the target range will be appropriate, with Chair Powell pointing to 50bps hikes in the next couple of meetings. source: Federal Reserve.

Crypto

• The entire crypto complex under pressure following the high US CPI print on Friday.
• The US dollar gaining across the board.
• BTC/USD traded at 25,191.3 after decreasing $3,998.4 or 13.70 percent since the previous trading session.
• Looking back, over the last four weeks, Bitcoin lost 14.15 percent.
• Over the last 12 months, its price fell by 37.85 percent.

• WORLD 540,616,578 / 6,331,621 / 515,943,034
• USA 87,321,703 / 1,035,847 / 83,159,792
• SA 3,978,590 / 101,484 / 3,854,515