Morning NOTE

GOOD MORNING

• USDZAR 15.5700
• EURZAR 16.6100
• GBPZAR 19.4600

SOUTH AFRICA   

• Comair announced late on Tuesday evening that it had to suspend all its kulula.com flights as well as the British Airways flights it operates under a licence agreement. IOL
• Comair said that it was holding talks with investors, hoping to resume flights soon, but there was still no indication of when this will be.
  • It was announced on Tuesday night that operations were being grounded due to what has been described as a liquidity crisis.
  • Passengers on Kulula and British Airways flights were outraged after they were left stranded.
  • Comair CEO Glenn Orsmond has denied that the airline deceived customers by having a sale, with planes grounded thereafter.
  • He argued that the sale was suspended as soon as management realised there was a liquidity crisis. EWN
• Eskom’s Medupi will remain unprofitable for the remainder of its life according to funder African Development Bank.
  • The mega coal-fired power station Medupi will not achieve a positive financial return over its lifetime, according to a report.
  • The Bank, which loaned Eskom R10.6 billion in 2009, has published its project completion report.
  • It details the many difficulties of the project, which has taken years longer than expected to finish and gone billions over budget. NEWS24

GLOBAL MARKETS

Stocks:

• US stock futures traded lower after stern comments from JPMorgan CEO Jamie Dimon, warning of an economic “hurricane” caused by the Federal Reserve and the war in Ukraine.
  • His comments sending stocks lower as it followed the Bank of Canada’s strong 50 bps hike.
• In regular trading on Wednesday, the Dow lost 0.54%, while the S&P 500 and Nasdaq Composite dropped 0.75% and 0.72%, respectively.
  • Earlier, Fed Governor Christopher Waller said on Monday that he is not “taking 50-basis point hikes off the table” until he sees inflation come back closer to the central bank’s 2% target.
  • Investors also digested new data which pointed to a still tight labor market and stronger-than-expected manufacturing activity, raising concerns about further interest rate increases.

• The US 10-year yield traded above 2.9% and in turn stayed near a two-week high hit in the previous session.
  • Once again concerns over a potential reacceleration in global inflation and an even more aggressive monetary tightening from the Federal Reserve.
    • Rising prices around the world remain a key concern for investors, with euro zone inflation data coming in much higher than expected on Tuesday.
  • St. Louis Fed President James Bullard noted on Wednesday that it is “too early” to call a peak in inflation,
    • He warned  that in past periods of high inflation, price pressures receded for months but then reasserted themselves.
    • Investors now look ahead to US nonfarm payrolls and inflation data for May for clues. source: U.S. Department of the Treasury

• The Dow  fell 176 to 32,813
• The SP500 fell 30 to 4,101
• The Nasdaq  declined 86 to 11,994

• image : Trading economics

• Asian markets traded lower on the back of a lower Wallstreet.
  • In Japan, the Nikkei 225 declined 0.16% to close at 27,414, giving back some gains from the previous session and taking cues from a weak overnight session on Wall Street.
    • Losses coming from technology and healthcare stocks.
    • Global equities traded lower after US economic data remained supportive of aggressive interest rate hikes from the Federal Reserve.
  • In Australia, the ASX 200 Index fell 0.8% to close at 7,168 on Thursday, erasing gains in the previous session and taking cues from a weak overnight session on Wall Street.
    • Technology and banking stocks leading the decline.
    • Global equities traded lower after US economic data remained supportive of aggressive interest rate hikes from the Federal Reserve.
    • It indicated widespread worries over high inflation and the threat of recession continued to weigh on investor sentiment.
• Brent crude oil dropped nearly 2% to $114/bl, following news that Saudi Arabia is ready to ramp up oil production should Russian output substantially decline due to western sanctions.
  • The Financial Times report also cited a diplomatic source as saying discussions were held about an immediate increase in output from Saudi Arabia and the UAE,
  • It could be announced at the OPEC+ meeting later today.
  • There were also speculations earlier this week that some producers were considering suspending Russia’s participation in a production deal of OPEC+, adding to the bearish sentiment.
  • A stumbling block remains as the EU failed to clinch a deal on a sixth sanctions package against Russia on Wednesday after Hungary raised new demands. Source : Energy news
• Gold traded above $1840/oz as widespread concerns over high inflation countered pressure from a strong Dollar and rising Treasury yields.
  • Persistent inflation remained an underlying theme supporting bullion prices, with the euro zone inflation data coming in much higher than expected on Tuesday.
  • Investors are also looking ahead to US nonfarm payrolls and inflation data for May for clues on the health of the economy and to guide the outlook for monetary policy.
  • Markets have priced 50-point interest rate increases from the Fed at each of the next two meetings in June and July, although the outlook beyond that remains uncertain.
  • Gold is considered as a hedge against inflation and economic and political uncertainties, but higher interest rates increase the opportunity cost of holding the non-yielding metal. Kitco metals
• Copper futures rose to above $4.3 per pound, closing in on its highest level in nearly four weeks.
  • Prices rallying by low inventories and prospects of higher demand following the ease of some Covid-19 curbs in top consumer China.
  • The latest data showed China’s factory activity fell at a softer pace in May and China’s key commercial hub of Shanghai allowed all manufacturers to resume operations from June.
  • The rise likely to add to global inflationary concerns.
• The US dollar traded above 102.5 supported by rising US Treasury yields and widespread concerns over high inflation.
  • The benchmark US 10-year yield jumped back above 2.9% on Wednesday as investors priced in a potential reacceleration in inflation, more aggressive monetary tightening and the possibility of a recession.
  • Rising prices around the world remain a key concern for investors, with euro zone inflation data coming in much higher than expected on Tuesday.
  • Fed Governor Christopher Waller said on Monday that he is not “taking 50-basis point hikes off the table” until he sees inflation come back closer to the central bank’s 2% target.
  • Investors now look ahead to US nonfarm payrolls and inflation data for May for clues on the health of the economy and to guide the outlook for monetary policy. Source FX news

• Russia-Ukraine

  • Russia was judged to be in default and also have breached the terms on a bond after missing a $1.9 million interest payment.
    • The event triggering an insurance pay-out potentially worth billions of dollars.
  • Russia said Ukraine’s demands to the West for the supply of advanced rocket launchers is a “direct provocation” after the US and the UK agreed to provide missile systems to Kyiv that will enable it to hit targets 50 miles away.
    • NATO does not foresee any Russian retaliation to the move by the US to supply the advanced weapons to Ukraine, Secretary General Jens Stoltenberg told CNN. Source : CNN
  • Ukrainian Defense Minister Oleksii Reznikov has publicly thanked US President Joe Biden and the US military.
    • He said : “I was pleased to see in the 11th package of military aid to Ukraine the six letters for which the whole country has been waiting: HIMARS,” Reznikov said in a Twitter post on Thursday.

• WORLD 533,655,789 / 6,315,931 / 504,597,142
• USA 86,146,955 / 1,032,410 / 82,303,090
• SA 3,960,424 / 101,219 / 3,817,002