Morning NOTE

GOOD MORNING

• USDZAR 15.9300
• EURZAR 16.8300
• GBPZAR 19.5000

SOUTH AFRICA   

• The final state capture report has exposed a series of glaring gaps in President Cyril Ramaphosa’s testimony on the widespread looting of state resources.
  • It also showed that he lied when quizzed on the work of the high-level review panel on the State Security Agency (SSA).
  • In addition, the state capture commission of inquiry has found that the Gupta criminal enterprise benefitted by R15.5 billion from irregular and unlawful contracts.
  • It however, conceded in the final report published on Wednesday night that the amount did not represent the full loss suffered by the state as a result of the Gupta-related capture. EWN
• Loadshedding continues with Eskom extending times to from Thursday to Sunday night.
  • Breakdowns being blamed for the current drop in capacity.
  • The SOE said the load shedding was due to the breakdown of four generation units on Wednesday morning, which contributed to the capacity constraints. NEWS24
• South Africa’s tourism industry has called on President Cyril Ramphosa and his “red tape team” to urgently intervene to unblock the “bureaucratic debacle” that is strangling the industry.
  • SA Tourism Services Association (SATSA) CEO David Frost on Wednesday laid the blame for this squarely on the National Public Transport Regulator (NPTR). Moneyweb

GLOBAL MARKETS

Stocks:

• US stock futures were lower in Asian trade on Thursday after the major averages slipped overnight.
  • The majors lower after down by economic concerns after Federal Reserve Chair Jerome Powell acknowledged the risk of a recession.
    • Futures contracts tied to the three major indexes were all in negative territory.
  • In regular trading on Wednesday, the major averages retreated into the close after rallying to start the day, with the Dow and Nasdaq Composite each losing 0.15%, while the S&P 500 shed 0.13%.
    • The moves came after Powell told Congress the central bank is “strongly committed” to bringing down inflation, and noted the “possibility” of a recession.
    • Energy and materials stocks led the decline as recessionary concerns dragged commodity prices.

• The 10-year US Treasury yield fell towards the 3.13% as investors rushed into safe-haven assets on concerns that an aggressive tightening from central banks could tip economies into a recession.
  • Powell’s testimony confirmed this after he acknowledged the possibility of a recession is real.
  • He added the central bank is not trying to engineer a recession to stop inflation.
  • But that they are fully committed to bringing prices under control, even at the risk of an economic slowdown.

• The Dow fell 471 points to 30,483
• The SP500 declined 4.91 to 3,759
• The Nasdaq  fell 16.22 to 11,053

• image : Trading economics

• Asian markets mixed following a topsy turvy session on Wallstreet.
  • In Japan, the Nikkei 225 Index edged up 0.08% to close at 26,171 with Japanese shares failing to hold on to gains from earlier in the session.
  • Traders citing a lacklustre session on Wall Street, as investors continued to assess risks of a global economic downturn.
    • Resource-related stocks declined as recessionary concerns dragged commodity prices, with losses from Inpex Corp (-2.6%), Nippon Steel (-1.1%) and Osaka Titanium (-6.2%).
• The YEN traded at 135.5 vs the US Dollar. It was the weakest level in 24 years.
  • The Bank of Japan continues its low-yield and stimulative policy at a time other major central banks are racing ahead with interest rate hikes.
  • The BOJ recently made a rare reference to the currency market, saying it needed to watch its impact on businesses and the wider economy.
  • The bank also resisted market pressure on the yen and government bonds amid earlier speculations mainly among foreign investors that the bank may tweak its current yield control policy.
• Crude oil and WTI crude futures fell below $104/bl Thursday, extending a sharp decline from the previous session.
  • The theme remains that aggressive US interest rate hikes could trigger a recession and hurt fuel demand.
  • Jerome Powell said on Wednesday that the central bank is not trying to engineer a recession to stop inflation but is fully committed to bringing prices under control, even at the risk of an economic slowdown.
  • Meanwhile, US President Joe Biden called on Congress to temporarily suspend the federal gasoline tax to give Americans some respite from record pump prices.
  • Elsewhere, Cecilia Rose, chair of the Council of Economic Advisers, said Wednesday that China and India may be buying more Russian oil than the US previously believed, easing a supply crunch in global markets.
• Gold declined to $1,830/oz, erasing gains from the previous session, pressured expectations that the Federal Reserve will continue to aggressively raise interest rates in its fight against inflation.
  • Fed Chair Jerome Powell indicated on Wednesday in his testimony before Congress that the central bank is “strongly committed” to bringing down inflation, while acknowledging the “possibility” of a recession.
  • When asked by a member of the Senate Banking Committee if the Fed could raise rates by as much as 100 basis points at once, Powell said he would never take anything off the table.
  • He also added officials would make whatever moves were needed to restore price stability.
  • Gold is often viewed as a hedge against inflation and a safe haven asset during economic crises, but higher interest rates raise the opportunity cost of holding non-yielding bullion. KITCO  Metals
• US dollar rallied to reach 104.48. Earlier the buck had fallen after tracking Treasury yields lower, amid growing concerns of a possible recession.
  • Federal Reserve Chair Jerome Powell said in a testimony to Congress that the central bank is fully committed to bringing prices under control, even at the risk of an economic downturn.
  • He acknowledged that a recession was “certainly a possibility,” reflecting market concerns that the Fed’s aggressive monetary tightening would hamper growth.
  • Powell also said that the Fed will keep raising interest rates following a 75 basis point increase last week.
  • Analysts expect the Fed to deliver another 75 basis point rate hike in July, followed by a 50 basis point increase in September.

• WORLD 546,710,803 / 6,345,918 / 522,359,680
• USA  88,443,398 / 1,039,771 / 84,153,379
• SA 3,989,007 / 101,697 / 3,873,790