Morning NOTE

GOOD MORNING

The ZAR managed to consolidate around the R17/$ handle in the face of a Dollar storm as global risk assets came under pressure.

• USDZAR 16.9800
• EURZAR 16.8600
• GBPZAR 19.9600

SOUTH AFRICA   

• After economists warned of Wednesday’s strike and the impact on the economy it has since emerged that;
• Trade union federation SAFTU wants government to avail a trillion rand to meet the demands it has made ahead of its national shutdown.
  • The union will host a march on Wednesday in seven provinces, raising the plight of the unemployed, electricity tariffs and the petrol price.
• ActionSA member and former MP, Vytie Mentor, has passed away following a long illness.
  • The 58-year-old was hospitalised for several months prior to her passing.
  • Mentor shot to fame after she alerted authorities of the enormous scale of the Gupta state capture.
  • Mentor served as an MP between 2002 and 2014 before joining ActionSA as its provincial chairperson in the Western Cape. EWN
• In a desperate bid to add energy to the national grid, Eskom announced a new training initiative for renewables.
  • The SOE announcing it is ready to start a renewable energy training centre at its Komati Power Station in Mpumalanga.
  • CEO Andre de Ruyter said they will go out to local and international investors to fund the project.
    • The power utility has struggled to keep the lights on, due to the high demand for energy.
    • This has resulted in unplanned blackouts which affects everyone from households, to businesses, and the private sector. IOL
• Energy expert, professor Hartmut Winkler, poured cold water on the idea of another nuclear plant.
  • He said, A new nuclear plant would take too long to build and cost too much to be a viable option
  • Winkler said expanding the life of the Koeberg Nuclear Power Station, would be a more viable option than passing the cost on to future generations.
  • Koeberg first started operating in 1984.

GLOBAL MARKETS

Stocks:

• US stock futures remained under pressure  on Tuesday after a sharp sell-off that brought the major averages to their lowest in at least two weeks.
  • Recession concerns on the back of the Fed , causing investors to exit risk assets.

• On Monday, the Dow declined 1.91%, the S&P 500 dropped 2.14% and the  Nasdaq fell 2.55%.

  • Sharp losses were also seen from mega-cap names including Tesla (-2.3%), Apple (-2.3%) and Nvidia (-4.6%).
• Investors zooming in on the annual Jackson Hole symposium later this week.
• Powell’s comments of particular importance.

Bonds:

• The US 10 YT yield traded above the 3% mark. It was a level not seen in a month, as investors worry about the outlook for monetary policy.
  • Hawkish comments from several Fed policymakers, notably, James Bullard, echoed the Fed’s intention to tighter monetary policy.
  • He continues to lean towards another 75 bps hike in September.
  • San Francisco Federal Reserve President Mary Daly highlighted the need to push interest rates to the restrictive territory to bring inflation down to its 2% target.

YESTERDAY

• The Dow declined 643 points to 33,063
• The SP500 fell 90 points to 4,137
• The Nasdaq dropped 323 to 12,381

Futures Trading:

• image : Trading economics

OVERNIGHT HEADLINES

• Asian markets sharply lower following Wallstreet negative start to the week. Rate fears coupled with a global recession the driving themes.
  • In Japan, the  Nikkei 225 dropped 1.2% to 28,450, as Japanese shares followed a sharp selloff on Wall Street.
    • Traders citing mounting concerns that the US Federal Reserve will continue to aggressively raise interest rates to stamp out inflation.
    • A Fed gathering in Jackson Hole, Wyoming later this week is expected to reinforce such commitment.
    • Investors also digested data showing Japan’s manufacturing activity growth slowed to a 19-month low amid declining new orders.
    • This was followed by more poor data as  the country’s services sector also contracted for the first time since March.
  • In Australia markets were also lower, following the sell-off in New York.
    • The ASX 200 fell 0.55% to 7,008, as losses in heavyweight financials outweighed gains in commodity stocks.
    • Australian shares registered sharp losses in the financial sector were led by Macquarie Group (-3.2%).
    • Retail drinks and hotel business Endeavour Group also plunged 10% despite posting a higher annual profit.
    • Supporting the index was a return to the upside of  energy and mining stocks, after commodity prices rebounded. Bloomberg
• Crude oil and in particular, the US benchmark WTI, gained towards $91/bl after Saudi Arabia warned that OPEC+ could reduce output to counter sharp declines in oil prices.
  • Saudi Oil Minister Prince Abdulaziz bin Salman told Bloomberg that extreme volatility and a lack of liquidity in the futures market do not reflect fundamentals.
  • He maintained their data continues to show signs of physical tightness.
    • adding the threat that of potential OPEC+ production cuts that could come at any time.
    • On the news, WTI prices reversed a sharp drop, after touching $86.28/bl on Monday.
  • Progress around reviving the 2015 nuclear accord also loomed large over the markets as a potential deal could boost Iranian oil exports by about 2.5 million bpd. Energy News
• Gold prices traded near one-month lows below $1,740/oz, after heavy selling pressure for 6 straight sessions.
  • Bullion remains under pressure on rate fears, that the US Federal Reserve will continue to aggressively raise interest rates to stamp out inflation.
    • Last week, several US policymakers offered hawkish statements on the need for further tightening.
      • The comments driving Treasury yields higher and the expense of Gold.
  • Traders are also gearing up for Fed Chair Jerome Powell’s speech at the annual Jackson Hole symposium. Kitco Metals
• The US dollar traded broke above the 109 mark, closing in on its highest level since September 2002.
  • Traders have now increased bets that the Fed will move on with its aggressive tightening plan to tame sky-high inflation.
  • St. Louis Fed President James Bullard was among the most hawkish policymakers last week.
  • His comments of  favouring another 75 bps hike in September, sent the Dollar soaring.
  • The most pronounced buying activity was against the Euro and the Pound, as soaring natural gas prices increased Europe’s risk of recession. Reuters

• The Euro crossed the key 1 dollar parity, as recession fears in Europe re-emerged again with a deepening energy crisis.
  • Natural gas shortages as well as inflation and rising rates a cause for concern.
  • The ECB behind the curve relative to the Fed exacerbating the single currency’s decline.  Fx news
•  NATURAL GAS
  • US natural gas futures topped the $9.80 mark for the first time since July 2008.
  • It was buoyed by prospects of increased demand for US LNG exports amid a deepening energy crisis in Europe.
  • Russia’s Gazprom said it would halt flows through the Nord Stream 1 pipeline to Europe for three days of maintenance at the end of August.
  • The main channel between Russia and Europe was already running at 20% capacity, putting pressure on the region as it seeks to refuel ahead of winter to avoid a natural gas shortage. Reuters