Morning NOTE

GOOD MORNING

The ZAR declined 5.20% last week on the back of a rampant Dollar, after yields spiked due to the FED’s commitment to bring down inflation.

• USDZAR 17.0200
• EURZAR 17.0600
• GBPZAR 20.1100

SOUTH AFRICA   

• Wednesday’s nationwide, planned strike by COSATU likely to cause more damage to the economy, according to leading economists.
  • The unions said the nationwide strike planned for Wednesday will include stay-aways and rallies, which are expected to take place across the country.
  • The unions are looking to voice their anger and frustration over the rising cost of living, relentless power cuts, high fuel prices and unemployment. EWN
•  The ANC in Limpopo has once again contradicted chairperson Stan Mathabatha’s assertion that the party supports President Cyril Ramaphosa’s second term ambitions.
  • For the 2nd time since January, the provincial ANC has distanced itself from Mathabatha’s endorsement of Ramaphosa ahead of the conference scheduled for Nasrec in Gauteng. IOL
  • Members saying the province has not yet decided on who to support in the upcoming national elective conference set for December.
• Ramaphosa has hit back at critics who have asked him to fire, the current finance minister Godongwana.
  • He said that it is important to  ‘Allow legal due process to run its course’.  News24

GLOBAL MARKETS

Stocks:

• Markets opening the week lower ahead of the much awaited Jackson Hole symposium.  All eyes likely to be on comments from Jerome Powell and guidance to rate policies.
  • Monday futures market for the major averages opened lower, after central bank commentary reignited fears of aggressive interest rate hikes.
  • Last week, the Dow fell 0.16%, the S&P 500 fell 1.21% and the tech-heavy Nasdaq declined 2.62%.
  • Federal Reserve officials indicated their commitment to keep raising interest rates to combat inflation.
  • The standout was St. Louis Fed President James Bullard saying, he is considering a third straight 75 basis point rate hike at the September meeting. CNBC

Bonds:

• The yield on the 10-year US topped 2.9%, a level not seen in a month, as investors reassessed the outlook for monetary policy following hawkish remarks from several Fed policymakers.
  • Fed governors highlighting, the Fed’s intention for tighter monetary policy and  leaning towards another 75 bps hike in September.
  • Market moves came after minutes from the last Federal Reserve meeting signalled that a dovish pivot is unlikely until such an aggressive tightening would drag on growth.
• In the UK,
  • Britain’s 10-year moved past 2.4%, on expectations the Bank of England will continue its aggressive tightening. The BOE widely expected to deliver a back-to-back 50 bps increase in rates.
  • This as inflation topped analyst estimates and hit a double-digit for the first time in 40 years in July.
  • The BOE raised borrowing costs by 50 bps earlier this month, the most since 1995 and financial markets price in a 96% chance of another half-point rate hike at the September meeting.
  • Such a move would bring borrowing costs to 2.25%, the highest since 2008. Reuters

ON FRIDAY

• The Dow declined 292 to 33,706
• The SP500 fell 55 to 4,228
• The Nasdaq declined 260 to 12,705

Futures Trading:

• image : Trading economics

OVERNIGHT HEADLINES

• Asian markets all lower following last week’s decline across the world.
  • In Japan, the Nikkei 225 declined 0.47% to close at 28,794, retreating further from 7-month highs.
    • Traders citing hawkish remarks from Federal Reserve policymakers reignited fears over aggressive US interest rate hikes.
    • Investors are also bracing ahead of Fed Chair Jerome Powell’s speech at the annual Jackson Hole symposium this week which could guide the outlook for US monetary policy.
• In Australia, the ASX 200 fell 0.95% to close at 7,047. The Aussie benchmark retreating from 10-week highs as investors worried about aggressive interest rate hikes from the FED.
  • Technology stocks led the decline and energy and mining stocks also tumbled on weaker commodity prices.
• Crude oil, declined below $90/bl, extending losses from last week.
  • Traders considered the prospect for more Iranian supply following US President Joe Biden’s discussions with European allies about reviving the 2015 nuclear deal.
  • Biden spoke with leaders from France, Germany and the UK on Sunday and discussed “ongoing negotiations” toward a nuclear agreement.
  • Oil and other commodities have also been declining since June over escalating fears of a global economic slowdown.
  • Traders blaming ultra, aggressive rate hikes to tame surging inflation as the main reason for a potential slowdown and a drop in demand. Energy News
• Gold declined  below $1,750/oz. The move a continuation after the Yellow metal was seen tumbling 3% last week.
  • The rise in US yields after hawkish remarks from US policymakers lifted the dollar in favour of Gold.
  •  Last week, a number of Federal Reserve officials stressed the need to keep raising borrowing costs to get ahead of inflation.
  • Bullard said he is considering support for a third straight 75-basis point rate hike in September.
  • However, markets are currently priced for a slightly higher chance of a 50 basis point rate increase in September.
  • Investors now look ahead to Fed Chair Jerome Powell’s speech at the annual symposium in Jackson Hole, Wyoming this week to guide the outlook for US monetary policy. Kitco metals.
• The US  dollar rallied above 108 on Monday. The Buck approaching a 20-year high of 109.3 reached in July.
  • The moves supported by views/bets on expectations that the Fed will continue to aggressively raise interest rates to bring down inflation.
  • Bullard the main culprit as he continues to call for 75. Markets however still looking at 50 as the most likely outcome.

• In Europe , the single currency  depreciated below $1.0100. the Euro continues to flirt with the key $1 dollar parity level as investors balance the ECB policy tightening path against the region’s economic outlook.
  • The ECB is seen raising rates by 50 bps in September, following a similar move in July to tame soaring inflation but the region’s outlook is of concern due to the energy crisis triggered by reduced supplies from Russia.
  • However, continuing to pressure the Euro is a Dollar is moving again toward 20-year highs lifted by hawkish remarks from Federal Reserve officials.