Morning NOTE

GOOD MORNING

The ZAR consolidated close to the R17/$ handle ahead of this week’s SARB MPC rate decision.

• USDZAR 17.0700
• EURZAR 17.3300
• GBPZAR 20.4500

SOUTH AFRICA   

• Eskom announced that load shedding will cease by the end of the week.
  • This comes as more generation units are set to be back online.
  • Eskom CEO Andre de Ruyter, confirmed large units are coming online, and that the country could emerge from the crippling load shedding. IOL
• In a shock to markets, Sasol, SA’s largest fuel producer, declared force majeure on the supply of petroleum products due to delays in deliveries of crude to the Natref refinery.
  • The refinery it owns with TotalEnergies SE, said it left just a fraction of the country’s fuel-production capacity still operational.
    • Natref, a 108 000 barrel-a-day plant, was forced to shut after the late oil shipments, the company said in a statement.
      • “Sasol Oil will not be in a position to fully meet its commitments on the supply of all petroleum products from July 2022”.
    • The shutdown means the whole of South Africa’s oil-refinery fleet is out of action after a string of other facilities suspended production over the past two years.
    • As a result, the country’s monthly petroleum product imports are set to as much as triple by next year from pre-pandemic levels, energy consultant Citac said in a May report. Moneyweb

• Suspended African National Congress (ANC) secretary general Ace Magashule has hailed the late Jessie Duarte as a unifier.

  • Ace Magashule said Jessie Duarte died with some of the party’s top secrets.
  • He  made the comments at Duarte’s funeral on Sunday.

• It has emerged, that Magashule  and former health minister, Mkhize as well as Mantashe all in the mix to contest the ANC presidential bid later in the year.  EWN

GLOBAL MARKETS

Stocks:

• Equities declined in the final few hours of US trading following, news that Apple plans to slow spending on growth in 2023, as it anticipates an economic slowdown.
• In regular trading on Monday, the major averages reversed a morning rally and sold off into the close.
  • The Dow fell 0.69%, while the S&P 500 and Nasdaq Composite declined 0.84% and 0.81%, respectively.
  • IBM also declined more than 4% in extended trading despite topping revenue and earnings estimates as the company lowered its forecast for cash flow.
• US stock futures were steady in Asian trade on Tuesday as investors gear up for more earnings reports from major firms, remaining watchful of any potential downside risks.
  • Earnings watch includes heavyweights Tesla, Twitter, Snap, Verizon and many others will also report later this week.

Bonds:

• The 10-year Treasury yield was little changed at 2.96% in the third week of July, below 3% hit early in the month.
• Investors have scaled back expectations the Fed will deliver a big 100bps rate hike next week and only hike by 75 bps.
• Last Friday, Fed Governor Waller and St Louis Fed Governor James Bullard said they favoured a 75 bps interest rate increase, rather than the 100 bps move.
  • At the same time, recent economic data showed the economy remains robust, despite strong inflation and rising interest rates.
  • Fed policymakers enter a “blackout” period this week before the FOMC meeting on July 26th and 27th.
  • Focus this week will be on corporate earnings and housing market indicators.

YESTERDAY

• The Dow declined 215 31,072
• The SP500 declined 32 points to 3,830
• The Nasdaq  declined 92 points 11,360

Futures Trading:

• image : Trading economics

OVERNIGHT HEADLINES

• Asian markets mixed in early trading.
  • US stock futures were steady in Asian trade on Tuesday as investors gear up for more earnings reports from major firms.
  • In Japan the Nikkei rallied 175 points to 26,964, with commodity-linked stocks leading the advance as the Federal Reserve nixed speculations for a bigger full percentage point rate hike.
    • Tuesday’s rally also came despite a weak overnight in New York after Apple said it would slow hiring and spending on growth next year to prepare for a possible economic slowdown.
  • In Australia, the ASX 200 declined 0.56% to close at 6,650, as losses in technology stocks countered gains in the resources sector.
    • Investors examined minutes of the RBA July meeting, where it signalled further hikes are needed.
    • The RBA said nterest rates were “still very low for an economy with a tight labour market and facing a period of higher inflation.”

• Crude oil futures steadied above $102/bl after rallying more than 5% in the previous session as a still tight global market countered fears that a looming recession would hurt energy demand.

  • President Joe Biden’s visit to Saudi Arabia failed to yield any pledge from Arab leaders to ramp up production.
    • A Bloomberg report quoted Iraqi Oil Minister Ihsan Abdul Jabbar as saying that crude will remain above $100 a barrel for the rest of the year and stay high for the next few years.
    • An easing dollar and the Federal Reserve’s pushback against speculations for a bigger 100 basis point rate hike also lifted market sentiment and supported buying interest. Energy News

• Gold steadied around $1,710/oz an ounce on Tuesday but remained close to its lowest levels in almost a year.

  • Headwinds from a strong Dollar and rising US interest rates continues to weigh on bullion’s appeal.
  • The metal also failed to sustain intraday gains made on Monday even as the dollar retreated. Analysts considered it a sign of technical weakness that increases the risk of further declines in gold prices.
  • The Federal Reserve is on track to raise interest rates by 75 basis points for the second month in a row at the July meeting, keeping the pressure on non-yielding bullion.
  • Signs of slowing economic momentum in China, Europe and even the US also failed to support gold prices as investors opted for the dollar as safe-haven asset.

• US Dollar

  • The dollar stabilized  around 107.5 after sliding for two straight days, as traders reassessed the Federal Reserve’s policy tightening path.
  • However, 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
    • However, some Fed officials quickly nixed such expectations and signalled that they are on track to raise rates by another 75 basis points this month.
    • Markets briefly speculated on a supersized 100 basis point rate increase last week after data showed US inflation accelerated further in June, marking a fresh four-decade high.
    • The news that Governors Bostic and Bullard dialed back expectations for a bigger full percentage point rate hike, slowed down the Buck’s advance.