Morning NOTE

GOOD MORNING

• USDZAR 15.9600
• EURZAR 16.8100
• GBPZAR 19.6100

SOUTH AFRICA   

• The fall out of the sharp petrol prices continues with union voices their concerns.
  • Cosatu in KwaZulu-Natal, together with other organisations, will protest in parts of the province on Friday against the rising public transport fees due to the high fuel price.
  • The main protest will take place in the Durban CBD.
  • The union is unhappy with the recent petrol price hikes, saying South Africans can no longer afford it.
  • With the high unemployment rate, Cosatu says the government must be challenged on the cost of living. EWN
• The N3 blockade that caused a congestion near Van Reenen’s Pass has now been cleared and the police said they have made arrests.
  • Earlier on Thursday morning, a number of trucks were abandoned on the national route blocking both directions.
  • The blockage disrupted some of the alternative routes between Johannesburg and Durban.
  • However, both lanes have now been opened. News24
• DA leader John Steenhuisen said that the future of South Africa’s youth looked bleak and the freedom won in 1994 had not translated into economic transformation.
  • On Thursday, Steenhuisen delivered his party’s Youth Day message in Alexandra as the country marked 46 years since High School students took to the streets to protest the education system.
• With the US announcing its biggest interest rate hike since 1994, local experts are hopeful that the South African Reserve Bank will not be so aggressive.
  • The federal reserve bank in the US increased its benchmark interest rate on Wednesday by 0.75%.
  • Alexander Forbes economist Isaah Mhlanga believes the SARB will be kinder to South Africans when it makes its next decision.
  • “They’ve already done 50, they’ve got some insurance for them and given our inflation dynamics, that’s not as high and aggressive as what we’ve seen in the US and Europe.
  • He added  25 basis points would make a lot of sense,” Mhlanga said. Reuters

GLOBAL MARKETS

Stocks:

• US stock futures climbed in early Asian trading on Friday as Wall Street tries to find its footing after a brutal week of selling.
  • Traders trying to figure out the potential economic costs of the Federal Reserve’s ongoing fight with inflation.
  • In regular trading on Thursday, the Dow lost over 700 points, falling below the 30,000 level, while the S&P 500 and Nasdaq tumbled 3.3% and 4.1%.
  • This resulted in all three benchmarks to levels not seen since late 2020.
• The Fed also raised its benchmark interest rate by the most since 1994 on Wednesday, raising the risk of recession in the world’s biggest economy.
• The major averages are on track for another losing week, extending a relentless selloff that brought the S&P 500 deep into bear market territory.

• The 10-year US yield fell below the 3.3% level as investors dumped stocks and rushed into safe-haven assets on concerns that an aggressive tightening from central banks could tip economies into a recession.
• The FED raised its target interest rate by 75 basis points on Wednesday to address the highest inflation seen since late 1981.
• The Bank also projecting a slowing economy and rising unemployment in the months to come.
• The FED move was followed by  the BoE, who delivered a 5th straight rate increase,
  • But what really surprised markets, were the SWISS when the SNB raised its policy rate for the first time in 15 years,
  • all sparking worries that other central banks could consider raising rates higher and faster. Source : US treasury

• The Dow  declined 741 to 29,927 (-2.42%)
• The SP500  fell 123 to 3,666 (-3.25%)
• The Nasdaq dropped 453 to 10,646 (-4.08%)

• image : Trading economics

• Asian Markets mostly fell on Friday after Wall Street sank overnight, as recession worries grew after the Fed’s largest rate hike since 1994.
  • The ASX and the Nikkei sank near 2%, each; and South Korean stocks were set to post their biggest weekly fall since March 2020.
• In Japan, the Nikkei 225 dropped 2.4% to below 26,000, hitting its lowest levels in at least a month.
  • Investors brace for a key policy decision from the BOJ on the back of rising pressure from a weak yen and rising global yields.
  • The BOJ is widely expected to maintain ultra-low rates and stress its resolve to support a fragile economy with massive stimulus.
  • Japanese shares also tracked losses on Wall Street as the Federal Reserve’s aggressive fight against inflation fanned fears of a potential recession. TE
• Crude oil falling on the back of Demand concerns.
  • Traders worried the FED’s aggressive policy action could lead to a recession and ultimately a drop in demand.
  • WTI trading below $117/bl and North Sea brent at $119,/bl down from $124/bl reached a few sessions ago.
    • Both benchmarks were headed for its first weekly decline since mid-April.
  • Central banks across the world have raised interest rates this week, led by the FED’s 75 basis point rate hike amid a global fight against surging inflation.
    • Analysts argued that drastic action was needed to get ahead of rising prices, but warned of a higher risk of recession.
    • The IEA warned that soaring oil prices and weakening economic forecasts dimmed the future demand outlook.  Energy News
• Gold traded $1,850/oz on the back of a rebound in the dollar and Treasury yields which put bullion on track for a weekly drop.
  • The metal is currently down more than 1% in what has been a volatile week.
  • The Fed delivering its largest hike since 1994, following a spike in global yields to combat inflation.
  • However, concerns about the potential economic costs of an aggressive tightening kept markets on edge, providing some support to gold prices. Kitco metals
• US Dollar declined to 104, after setting a 20yr high above 105 earlier in the week.
  • The move by the FED forced other central banks to consider raising rates higher and faster.
  • The Fed delivered a 75bps increase, the largest since 1994, while Chair Jerome Powell said that a 50 or 75 basis point increase “seems most likely” at the next meeting in July.
  • In response, today the Swiss National Bank (SNB) unexpectedly hiked its policy rate by 50bps to -0.25%, as well as the BOE raising rates for the 5^th meeting.
  • The BOE also said it’s prepared to unleash larger moves if needed.
  • The moves providing support for Cable and the Swissy at the expense of the Greenback. FX news

• Central Bank Policies

  • Investors now worried the FED might “ break something”.
    • i.e. cause a recession as economic data shows a slowdown might already be on the way.
    • Powell’s assurances that the economy was on a strong footing was met with deaf ears by investors who sold stocks aggressively.
    • RBC Economist, Tom Porcelli in a note to clients said “With all due respect to that comment, it’s just not consistent with the data on the ground”.
    • Also,
    • Quincy Krosby, chief equity strategist at LPL Financial added ;
      • “What the market is worried about, even before you get to a recession, is a policy mistake, that the Fed breaks something,”
      • and “The market also questioning his comment that the economy is strong.” CNBC

• WORLD 543,151,357 / 6,338,140 / 518,335,171
• USA 87,861,132/1,037,928 / 83,611,613
• SA 3,983,675 / 101,584 / 3,866,240