Morning NOTE

GOOD MORNING

The ZAR strengthened on the back of a risk rally following disappointing corporate earnings.

• USDZAR 17.0600
• EURZAR 17.2000
• GBPZAR 20.2700

SOUTH AFRICA   

• President Cyril Ramaphosa has moved to quell tensions amid a flurry of threats to shut down the country over a myriad of issues.
  • This is on the back of calls for the President to step down, with some South Africans accusing him of failing to effectively lead the country out of the many crises it faces.
  • Anger has been rising over several challenges that are reducing South Africans’ quality of life on an everyday basis. This includes rolling blackouts and the cost of living crisis.
  • CR told journalists in Mpumalanga on Saturday that he was aware of the bubbling tensions. Source : EWN
• Ramaphosa backed down on his comments of a second state-owned power station to rival embattled Eskom.
  • This comes after he and Energy and Mineral Resources – Minister Gwede Mantashe made public comments about the need for a second power utility to take the pressure off Eskom.
• ANC presidential hopeful and Disgraced former health minister Zweli Mkhize has bemoaned the treatment of former President Jacob Zuma.
• He also added he dismisses the notion of the “nine wasted years” under the former leader.
  • He is campaigning in ZUMA strongholds in KZN as his continues his bid for the ANC presidency vs the current incumbent Ramahosa.
  • Mkhize told supporters and allies that he believed the events leading up to the July unrest in 2021 following Zuma’s incarceration for contempt of court could have been handled differently. Moneyweb

GLOBAL MARKETS

Stocks:

• US stocks rallied hard on Friday following comments from Bullard and Bostic.
  • Major indexes adding nearly 2% in gains, and shrugging off major corporate earnings disappointments.
  • The Dow adding 658 points, the SP500 gaining 72.
• US retail sales coming in better-than-anticipated for June, while consumer inflation expectations softened in July.
• Traders awaiting housing data out of the US this week, another indication of the health of the US economy.

Bonds:

• Global yields stable following comments from the fed governors that 75 bps will be the most likely outcome.
  • The 10YT in the USA trading at 2.94% ahead of the month end FOMC meeting.
  • In the UK, the 10Yr rose to 2.1%.
    • Traders continue to assess the impact on growth from higher interest rates and the race to the next UK’s Prime Minister.
    • The BoE has raised rates five times by 115 percentage points since December, but traders have scaled back some rate hike bets.
    • After the UK’s economic outlook has deteriorated markedly due to sky-high inflation that hurts household consumption.
    • Meanwhile, six candidates remain in the running to replace UK PM Boris Johnson. Source : Reuter

ON FRIDAY

• The Dow added 658 to 31,288  .  + 2.15%
• The SP500 added 72 to 3,863 . + 1.92%
• The Nasdaq  added 201 to 11,452 . +1.79%

Futures Trading:

• image : Trading economics

OVERNIGHT HEADLINES

• Asia

  • Stocks in  Asia advanced on Monday, following the rally on Wall Street Friday after an upbeat US retail sales.
    • Traders citing news that Beijing has sufficient monetary tools, including further cutting banks’ RRR, to support the economy.
      • Markets in Japan were closed for a holiday.
    • The Hang Seng jumped over 2.5% and the Shanghai Composite emerged from 1-month lows.
  • In Australia, the ASX 200 Index rose 1.23% to close at 6,687, tracking gains on Wall Street from late last week as investor sentiment picked up.
    • The news after Bostic and Bullard maintained 75 bps as the hike expected and not 100 bps supporting markets.

• Crude oil

  • US Crude prices, traded above $98/bl and in turn recovering losses as investors grappled with ongoing supply tightness.
    • Traders citing, President Joe Biden’s visit to Saudi Arabia failing to yield any pledge from Arab leaders to boost production further.
      • Saudi ministers insisted that OPEC+ would base their policy decisions on market dynamics ahead of the group’s meeting on August 3.
    • The moves also came even after top US energy envoy Amos Hochstein indicated confidence on Sunday that oil producers would take “a few more steps” to increase supply.
      • WTI, the US benchmark declined almost 7% last week and has been declining since mid-June.
    • Growing recession concerns, driven by aggressive rate hikes worldwide, ripped through commodity markets.
      • Traders also remain wary about the prospect for wider Covid-19 lockdowns in China and western proposals for a price cap on Russian oil. Source : Energy News

• Gold

  • Gold rose above $1,710/oz, following a decline in the US Dollar. The move saw Bullion rising from 11-month lows as investors dialled back expectations of a 100 bps hike.
    • Atlanta Fed President Raphael Bostic and St. Louis’s James Bullard signalled on Friday that they are on track to raise rates by 75 basis points for the second month in a row at the July 26-27 meeting.
    • A key survey also showed consumer inflation expectations softened in July, coming in at 2.8% over a five-year horizon from 3.1% in June.
    • However, gold just came off its fifth straight losing week, facing pressure from tightening monetary conditions and investors’ preference for the dollar as a safe-haven asset. Source : Kitco metals

• US dollar

  • The US dollar declined below 108 as traders reassessed the Federal Reserve’s policy tightening path and dialed back expectations for a bigger 100 basis point rate hike.
    • The expectation of a 100 point hike had fueled a dollar rally.
      • Earlier Atlanta Fed President Raphael Bostic and St. Louis’s James Bullard signalled on Friday that they are on track to raise rates by 75 basis points for the second month in a row at the July 26-27 meeting.
    • The news pushing back against speculations for a larger full percentage point increase.
      • Meanwhile, the dollar remains close to its highest levels in 20 years, underpinned by a relatively more aggressive US monetary tightening and safe-haven inflows spurred by global recession fears. FX news

Crypto winter

• The collapse in TerraUSD (stable coin) has claimed another South African victim.
  • Invictus Alpha and parent company New World Holdings have been placed in liquidation.
  • Headquartered in the British Virgin Islands but managed out of Cape Town, Invictus Alpha and parent company New World Holdings have been placed in liquidation in the British Virgin Islands due.
• Reasons given were excessive exposure to the collapsed Terra/Luna stablecoin.
  • Invictus management ploughed funds into an experimental stablecoin,  TerraUSD (UST) where yields of up to 20% a year were being offered. MoneyWeb