Morning NOTE

GOOD MORNING

The ZAR weakened to 16.2500, on the back of Eskom and the seriousness of the power crises.

• USDZAR 16.2100
• EURZAR 16.8700
• GBPZAR 19.8700

SOUTH AFRICA   

• Eskom plunged the country into darkness after emergency loadshedding resumed.
  • The SOE reporting It had lost units at its Arnot, Majuba, Hendrina and Kusile power stations, and two units at Lethabo since Friday night.
  • The units at Majuba and Hendrina were returned to service by Sunday, but by then the utility had lost a further unit at Majuba, along with units at Tutuka and Camden.
  • That’s nine units lost in 48 hours, of which two were put back into service. . Source : MoneyWEB
• SAA : The sale of the troubled state airline to a private consortium enters its final stage, with government promising an end to financial support.
  • Public Enterprises Minister Pravin Gordhan confirmed this during an address to the Standing Committee on Public Accounts (Scopa) on Tuesday.
  • Gordhan promised that it will be the new controlling shareholder’s responsibility to fund the airline going forward.
• The DOH, reported South Africa has recorded 3,838 new COVID-19 cases in the past 24 hours.
  • This is a representation of 22% positivity rate of infections in the latest period under review here at home.
  • However, ZERO deaths were reported.
• Reserve Bank’s rate decision and inflation to take centre stage
  • The monetary policy committee is widely expected to announce a 50 basis point rise.
  • The SA Reserve Bank (MPC) is widely expected to raise interest rates in the 4th successive meeting.
  • The MPC will announce its latest interest rate decision on Thursday .
  • It is increasingly expected to hike by 50 basis point (bps) hike to 4.75% to contain high inflation, which is near the upper limit of its 3-6% target range.

Stocks:

• After a strong rebound on Friday, US stock futures retreated on Monday after another volatile week on Wall Street.
  • Traders now await a busy earnings week for retailers.
  • The major averages went into relief rally mode on Friday to cap off a bad week for stocks in which the S&P 500 nearly descended into bear market territory.
  • The tech-heavy Nasdaq Composite fell 2.8% last week, while the S&P 500 and the Dow lost 2.41% and 2.14%, respectively.

• Analysts said there are good buying opportunities at the market’s current low, but remained cautious as the Federal Reserve has just begun its rate hike cycle.

• The yield on the 10-year US Treasury note, consolidated at around 2.90% as investors reassessed the outlook of tightening monetary policy.
• In an interview with Marketplace on Thursday, Federal Reserve chair Powell warned that bringing inflation down to the central bank’s target of 2% could cause some economic pain. Bloomberg

• The Dow  gained 466 to 32,196
• The SP500 rallied 93 to 4,023
• The Nasdaq  gained 434 to 11,805

• image : Trading economics

• Asian markets recovered in early trading following the relief rally on Wall street.
  • In Japan, the Nikkei 225 Index rose 0.45% to close at 26,547, as Japanese shares tracked a relief rally on Wall Street on Friday, while weak Chinese economic data dragged sentiment.
    • Global equity markets have been facing heightened volatility amid concerns over rising interest rates, high inflation and a global economic slowdown.
  • Meanwhile an economic slowdown in Japan’s major trade partner weighed on sentiment, as China’s industrial production and retail sales shrank far worse than expected.

• Crude oil fell more than 1% to around $109 as investors took profits following strong gains from late last week, while weak economic data in China weighed on sentiment.

  • The US oil benchmark rallied last week on lingering supply concerns, prompting investors this week to take some bets off the table.
  • Markets also turned cautious early on Monday after China reported disappointing economic numbers as a result of Covid restrictions.
  • The data highlighting concerns of a demand slowdown from the world’s top crude importer. Energy news
• Gold traded near its 3 month low of $1,810/oz and in turn continued its 4 week slide. The move as a surging dollar continued to sap demand for dollar-priced bullion.
  • The dollar steadied near a fresh 20-year high scaled on Thursday as a strong US inflation print reinforced bets for aggressive Federal Reserve rate hikes.
  • 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%, stoking worries that elevated prices may persist.
  • The US central bank raised its benchmark overnight rate by 50 basis points last week and markets are pricing in equivalent hikes at each of the next two Fed meetings in June and July. Kitco metals
• The US dollar traded at 104, hovering near 20-year highs as US inflation came in higher-than-expected, keeping the Federal Reserve on course to tighten monetary policy aggressively.
  • Markets are priced for at least a half percentage point rate increase at each of the next two Fed meetings in June and July, according to the CME FedWatch Tool.
  • The dollar has also been buoyed recently by haven demand due to economic uncertainties surrounding Europe and China. FX news

• In a blow to Vladimir Putin and his opposition to NATO expansion,
  • Finland informed Russia of its intention to seek NATO membership.
  • The Nordic country and eurozone member “wants to take care of the practical questions arising from being a neighbour of Russia in a correct and professional manner,” said Niinisto, who has communicated regularly with Putin in recent years.
  • Finnish President Sauli Niinisto spoke with his Russian counterpart Vladimir Putin on Saturday about the Nordic country’s application for NATO membership, expected to be announced this weekend, his office said.

• World 519,865,036 / 6,284,713 / 474,595,557
• USA 84,066,,379 / 1,026,109 / 81,163,689
• SA 3,871,085 / 100,630 / 3,696,731