Morning NOTE

GOOD MORNING

The ZAR drifted weaker on the back of a recovering Dollar and rising US yields.

• USDZAR 16.2600
• EURZAR 16.6500
• GBPZAR 19.7000

SOUTH AFRICA   

• In a Risk to SA financial markets, SA Finance Minister Enoch Godongwana is yet to be charged after a case of sexual assault was opened.
  • At the weekend, Mpumalanga police confirmed that a case had been opened against a prominent person.
    • Skukuza Police Station confirmed a criminal complaint was laid by a hotel employee.
  • The woman, who works at the Kruger National Park, has accused Godongwana of violating her while on holiday with his wife. EWN
• South Africa will have an infrastructure investment gap of R4.8 trillion by 2030.
  • The numbers are based on the aspirational target in the National Development Plan (NDP), and will likely happen unless the country increases its investment in infrastructure.
  • This is according to Dr Hurbert Joynt, programme manager for Infrastructure South Africa’s Centre for Excellence.
  • He reiterated that the aspirational target in the NDP is for gross fixed capital formation to comprise 30% of GDP by 2030. Moneyweb
• Striking employees of the South African Revenue Service (SARS) have returned to work.
  • The announcement came after unions suspended their industrial action, against the revenue collector .
  • Although employees have returned to work, the parties have not yet reached an agreement meaning that unions and SARS will have to return tp the negotiating table.
    • “The suspension of the industrial action affords all parties the opportunity to work towards progressing the negotiations and related discussions towards settling the dispute,” said SARS in its statement. Moneyweb .

GLOBAL MARKETS

Stocks:

• After a strong end to last week, with stocks rallying strongly after the softer than expected inflation data.
  • The SP500 reaching 4186. The broader market index up 17% off the lows reached in June (3635).
  • The market of the opinion the FED will have to slow down as the economy contracts.
  • In addition, there are no signs of a shrinkage of the FED’s balance sheet , if any it continues to grow, resulting in QE conditions that will continue to support risk assets.
• This morning stocks futures mixed in Asia, US futures (lower) on the back of profit taking, but Asian equities ( lagging ) remain well bid on the back of easing inflationary conditions in the USA.

Bonds:

• The US 10-year note consolidated around the 2.90% level, a level not seen in three weeks.
  • Traders continue to bet that the Federal Reserve will go ahead with its aggressive tightening plan despite signs of cooling inflation.
    • SF Fed President Mary Daly, said that while she sees a 50 bps rate hike in September as appropriate, she left the door open for a sharpest move to tame sky-high inflation.
  • Market moves came despite softer-than-expected US headline inflation and the first decline in producer prices in more than two years.
  • The Fed continues to want to front load the hiking cycle to combat inflation resulting in a severe inversion of the 2 v 10’s, that is traditionally a good indicator of a recession.

ON FRIDAY

• The Dow added 424 to 33,761
• The SP500 gained 72 to 4,280
• The Nasdaq  added 267 to 13,047

Futures Trading:

• image : Trading economics

OVERNIGHT HEADLINES

• Asian markets  all higher following last week’s strong performance on Wall Street.

  • In Japan, the Nikkei 225 jumped 1.14% to close at 28,872, with the benchmark hitting multi-month highs.
    • Growth-oriented technology and consumer stocks led the advance, with strong gains from SoftBank Group (5.2%).
    • Investors also assessed data showing Japan’s economy grew 2.2% on an annualized basis in the second quarter of 2022, lower than the 2.5% increase expected by analysts.
    • Traders citing easing inflationary pressures in the US as the major factor for a change in market sentiment that inspired a fresh rally in global stocks.
    • In Australia the ASX 200 rose 0.45% to close at 7,064. The index higher as it moves towards its highest level in over two months.
      • Australian shares also tracked a Friday rally on Wall Street as signs of easing inflationary pressures in the US lifted investor sentiment.
      • In addition, Nearmap Ltd led technology sent stocks higher, after it jumped 25.8% after getting a A$1.06 billion takeover bid from a US private equity firm.
• Crude oil flatlining with WTI trading around the $91.20/bl level for the last few session. Last week’s prices were higher on supply concerns.
  • This morning WTI futures fell toward $91/bl, extending losses in the previous session.
  • Traders citing demand concerns as global economies continue to slowdown. In addition, prices facing pressure from the prospect for increased supply from Iran and Saudi Arabia .
    • Iran’s state-run IRNA reported Friday that an EU proposal to revive the 2015 Iran nuclear deal “can be acceptable if it provides assurances” on Tehran’s key demands.
    • Saudi Aramco also said that the state-owned firm stands ready to raise crude output to its maximum capacity of 12 million barrels a day if the Saudi Arabian government orders it to do so.
    • On the demand side, weak economic data raised fresh demand concerns in top importer China.
• Gold continues to hold its gains. The Yellow metal advancing even though US yields have once again begun to rise.
  • Prices consolidated near the key psychological level of $1,800/oz.
  • Traders citing a falling dollar amid expectations that the Federal Reserve may slow the pace of interest rate hikes due to signs that price pressure may have peaked.
    • US import prices fell for the first time in seven months in July, due in large part to lower fuel and nonfuel costs.
  • The data came after US consumer and producer price growths posted lower-than-expected in July, prompting speculations of peak inflation.
• The US dollar recovered to trade at 105.87, after rising half a percent in the previous session.
  • Traders reassessed the outlook of US monetary policy following a raft of hawkish remarks from Federal Reserve officials.
  • Following comments from Fed president Mary Daly, the Richmond Fed Bank President Thomas Barkin followed suit.
  • He said the Fed will have to continue to move rates into “restrictive territory” until he sees a period of sustained inflation under control.
  • He also acknowledged easing consumer and producer prices in July as a welcome sign, but wants to see inflation running sustainably within the 2% target.