Morning NOTE

GOOD MORNING

The ZAR consolidated around the 16.4200 level as traders await tonight’s US FOMC minutes.

• USDZAR 16.4000
• EURZAR 16.6900
• GBPZAR 19.8800

SOUTH AFRICA   

• Water crises?
  • Rand water announced that parts of Gauteng are expected to be without water this weekend, as it  will be carrying out planned maintenance on one of its pipelines from Friday.
  • The utility said that residents in the cities of Johannesburg, Ekurhuleni, and Tshwane, as well as other direct customers of Rand Water would be affected by the 87-hour water outage. EWN
• After the AA reported an expected decline in fuel prices due to the decline of international oil prices, fears arose that it would be short lived according to (Organisation Undoing Tax Abuse (Outa) CEO Wayne Duvenage.
  • He said, the organisation is concerned that SA Minister of Finance Enoch Godongwana may use this as an opportunity to increase the fuel levy by 25c to 30c per litre.
    • The reason would be to raise additional revenue to cover the GFIP bonds, which the e-toll debacle has failed to do.
  • In addition, Transport Minister Fikile Mbalula’s added that a final decision on the future of e-tolls will be announced when Godongwana delivers the Medium Term Budget Policy Statement (MTBPS) in October, or before then. Moneyweb
• 10 years after the Marikana massacre, families of the dead continues to invite Ramaphosa to visit the site. CR at the time was the chairman of Lonmin as was widely blamed for the event.
  • Opposition parties using the date and blaming the government for neglecting Marikana for 10 years.

GLOBAL MARKETS

Stocks:

• Equities rallied strongly in New York with the Dow and S&P 500 gaining 0.71% and 0.19%, respectively.
  • Prices pushed higher by strong quarterly results from Walmart and Home Depot.
• This morning US stock futures were little changed on Wednesday after the major averages ended mixed in the last regular session.
  • Traders welcoming the upbeat earnings reports from big retailers, but remaining cautious about the FED’s plans to continue raising interest rates to bring down inflation.
  • However, the tech-heavy Nasdaq fell 0.19% as growth stocks remain under pressure from rising interest rates.

Bonds:

• The US 10-year yield  traded higher to 2.84% as investors awaited minutes from the Federal Reserve’s last meeting.
  • The minutes likely to give an insight into the economy’s health and the pace of interest rate hikes.
  • While some recent inflation reports showed evidence that price growth could be slowing, the job market remains extremely tight.
  • Investors speculating that the Fed will use this as a reason to maintain the pace of rate hikes.
  • In addition, the Federal Reserve has been reassuring markets that a dovish pivot is unlikely.

INFLATION :

• UK Inflation Rate Hits 40 year high and the Highest Since 1982
• The annual inflation rate in the UK increased to 10.1 percent in July of 2022 from 9.4 percent in the previous period  and  above market forecasts of 9.8 %.
• It was the highest reading since February 1982, amid soaring energy and food prices.
• Traders expecting the BOE to maintain its aggressive rate policy to get price rises under control.
• Before the data the UK 10Y was trading at 2.13% with traders pricing in a 50bps hike.
• However, this latest print could risk 75 bps.

YESTERDAY

• The Dow gained 239 to 34,152
• The SP500 added 8 to 4,305
• The Nasdaq  declined 25 to 13,102

Futures Trading:

• image : Trading economics

OVERNIGHT HEADLINES

• Asian markets traded higher following the rally on Wallstreet after corporate results surprised to the upside.
  • Traders however remain cautious ahead of tonight’s minutes, especially after the UK print this morning.
  • In Japan, the Nikkei 225 rose 0.81% to break above 29,000, with both benchmarks hitting their highest levels in 7 months.
    • Traders ignoring concerns about a global economic slowdown and cheered upbeat corporate earnings.
    • Japanese shares also tracked overnight gains on Wall Street spurred by upbeat quarterly results from major US retailers.
  • In Australia, the ASX 200 Index rose 0.31% to 7,128 on Wednesday, closing at its highest level in ten weeks.
    • Traders welcoming the lower-than-expected Australian wage growth and reduced bets of another half-percentage point rate hike in September.
    • Australian shares also tracked overnight gains on Wall Street driven by upbeat quarterly results from major US retailers. Source : Reuters
• Crude oil futures rose toward $88/bl on Wednesday after an industry report showed a larger-than-expected decline in US crude inventories.
  • Prices remain under pressure failing more than 8% in the previous 3 trading sessions.
  • Demand worries due to the fears of a recession continues to pressure prices.
  • In addition, the EU said on Tuesday that it was studying Iran’s response to a “final” draft agreement on reviving the 2015 nuclear accord.
  • Industry experts concluding that a potential deal could add about 2.5 million bpd of Iranian crude to the global markets. Source :  Gulf Energy news
• Gold prices stabilized near $1,780 /oz and remained below the key $180/oz level.
  • In addition, prices remained above the 50 period moving average.
  • Traders await the minutes of the last Federal Reserve policy meeting that could offer fresh clues on the central bank’s rate hike path.
  • Various Fed governors maintained their views, that the Fed will have to continue to move rates into “restrictive territory”.
  • This would be likely until they see inflation sustainably moving within the target range for a significant period. Source :  Kitco metals
• The US Dollar remained above 106 as traders wait for the release of the FOMC minutes.
  • In addition, US retail sales data also key as it could give insight into the health of the US consumer.
  • The Greenback remains about 0.7% up this week.
    • as several central bank officials reassured markets that a dovish pivot is unlikely despite signs that inflation could be peaking.
  • The dollar also benefited from safe-haven buying as weak Chinese and US data reignited fears of a global recession. Source : FX news