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Morning NOTE

23 May 2022


The ZAR strengthened to 15.7600 in Asia trading following a strong comeback rally on Wallstreet in the final hour of trading on Friday.


  • The Rand recovered from 15.9500 to trade at 15.7600, following a remarkable turnaround on Wallstreet on Friday night.
    • At one stage the SP500, and Dow were trading firmly in bear market territory before 100 point bounce in SP500.
      • Traders citing various reasons including short cover, profit taking as well as lower US yields.
      • In addition, weekend analysts trying to make sense of everything, added shocks are fairly priced in.
      • This remains hard to believe given the FED’s hardened Hawkish stance to fight inflation.
  • SA received a ratings boost from S&P Global (see further down) in note, this is likely to be ZAR supportive

On the data front, market movers this week are :

  • Wednesday : 20h00  US FOMC MINUTES
  • Thursday : 11h30  SA PPI
  • Thursday : 14h30 US GDP
  • Today : Expect some consolidation with a continued bias for a stronger ZAR.
    • This likely to be a follow on after the strong comeback on Wallstreet.
    • Traders now awaiting the FOMC minutes, with some longer term investors buying risk assets regarded as “ Deep Value”.
  • USDZAR :  Expect a range 15.6700-15.9600
    • Importers 15.7600-15.6700
    • Exporters 15.8600-15.9600
  • EURZAR :  Expect a range of 16.6300-16.8700
    • Importers 16.7100-16.6300
    • Exporters 16.8100-16.8700
  • GBPZAR :  Expect a range of 19.6500-19.9200
    • Importers 19.7200-16.6500
    • Exporters 19.8700-19.9200
  • USDZAR 15.7800
  • EURZAR 16.7300
  • GBPZAR 19.8200


  • Eskom to cut 2 000MW from SA grid every evening this week
    • Eskom has staged national power outages in all but one month this year and has instituted rolling blackouts on 19 days so far in May.
    • Eskom will continue staging rolling blackouts during the coming week due to a shortage of generation capacity.
    • The utility, responsible for almost all of South Africa’s power, will cut 2 000 megawatts from the national grid from 5 p.m. to 10 p.m. local time throughout the week,
    • They posted it on twitter.  Moneyweb
  • In addition to power cuts, Eskom announced that they discovered acts of sabotage with the 4th suspected incident in the past 2 week. News 24
  • More floods in KZN  :
    • The KwaZulu-Natal government said it’s still trying to assess the extent of the damage caused by floodwaters this weekend.
    • There are fears that numerous people have been harmed while damage to property was extensive in the overnight rains.
    • The destruction comes just a month after heavy rains flooded settlements, ravaged homes, and displaced thousands of residents. IOL
  • Disgraced former health minister Zweli Mkhize said he is willing to contest the ANC leadership position at the party’s end of year congress.
    • The leader of the ANC, is the de-factor president in the next election should the ANC obtain a majority.
      • This after parliament cleared him from wrong-doing in the digital vibes tender scandal.
      • The DA expressed outrage and said they were disappointed in the outcome.
        • It emerged that digital vibes paid for maintenance work at his Bryanston property.
        • The other complaint was related to his son, who received R460,000 from the same company. EWN


  • S&P Global adjusted SA’s rating from stable to positive.
    • National Treasury has welcomed South Africa’s revised credit rating, saying this followed structural reforms in the economy, current account surplus and other initiatives to boost the economy.
  • Some of the reforms cited were;
    • Several measures by the government to ensure economic growth.
    • Some fast-tracked initiatives to cut red tape and bottlenecks in the system to allow for the economy to grow.
    • This would ensure more jobs were created. Business day



  • US stock futures rose on Monday after the major averages extended their weekly losing streaks amid a backdrop of rising interest rates, high inflation and a highly uncertain growth outlook.
    • Last week, the Dow marked its first eight-week losing streak since 1923, while the S&P 500 and Nasdaq Composite both capped their first seven-week losing streak since 2001.
  • The losses came as quarterly reports from major US retailers indicated that corporate margins are starting to get hit by surging inflation and a weakening consumer base.
    • Meanwhile, investors await a fresh batch of earnings reports this week, including an array of big retail names.
    • Markets also look ahead to minutes of the Federal Reserve’s May meeting and US GDP estimates.
  • US yields have dropped to 2.81% as investors flock to the safety of cash, following brutal moves lower in risk assets and equity markets.
    • Core government debt has been rallying since last week as investors rushed into safe-haven assets.
    • Even though economies are dealing with high inflation and the threat of a recession, on the back of aggressive tightening from central banks.
    • The yield on the 10-year US Treasury note, which sets the tone for corporate and household borrowing costs worldwide, eased to a four-week low of around 2.8%.
    • In Europe yields were also lower, after Germany’s 10-year Bund yield, the benchmark for Europe, bottomed below 1%. source: U.S. Department of the Treasury
  • The Dow added 8.77 to 31,261
  • The SP500 ended flat at 3,901
  • The Nasdaq traded in the red at -33 to close at 11,354
Futures Trading:
  • image : Trading economics
  • Asian markets all higher following the extraordinary late session bounce on Wallstreet.
    • In Japan, The Nikkei 225 rose 0.98% to 26,872 closing at their highest in over two weeks, as risk sentiment improved.
      • The rally despite a market environment threatened by rising interest rates, surging inflation and global growth concerns.
      • Investors remained upbeat about the potential relaxation of border controls in Japan after the country scrapped Covid-19 tests for arrivals and eased some masking guidelines.
    • In Australia, the ASX 200 Index traded  up 0.05% to close at 7,148 on Monday after gaining in the previous session, as investors were digesting the results of elections.
      • The benchmark index has risen an average of 2.4% in the three months following eight of the last ten elections, according to data compiled by Bloomberg.
      • Centre-left opposition led by Anthony Albanese won on Saturday, while the exact makeup of the parliament remains uncertain.
    • Australians, ravaged by floods and wild-fires flocked to voting stations to oust the incumbent Aussie PM Scott Morrison.
      • The Aussie government largely friendly to large coal mining lobby have largely denied climate change.
      • Using it as a platform, the new Aussie PM, Anthony Albanese, vowed to change that and turn Australia in to a leader in Renewables.
      • Investors now await clarity on the incoming administration’s economic agenda.
  • Crude oil rose above $110.5/bl and adding to gains from the past 2 sessions, as expectations of increased US fuel demand and hopes for demand return in China.
    • US gasoline and diesel prices remained at record levels as the US peak driving season, which traditionally begins on Memorial Day weekend at the end of May and ends on Labour Day in September.
    • Also, traders continued to track the Covid situation in China, with Shanghai due to reopen on June 1 while record cases in Beijing kept markets on edge.
    • Investors expect a pick up in Chinese demand on easing restrictions in movement and as stimulus measures kick in.  Energy News
  • Gold traded above $1,850/oz, lifted by a weaker Dollar, with fears that aggressive Federal Reserve rate hikes would tilt the US economy into recession also spurring haven demand for the metal.
    • Year-to-date, the broad stock market index is down nearly 20%, with the SP500 falling well below 4,000 points.
    • In contrast, the gold market is roughly neutral on the year and is clearly the outperforming asset. Kitco metals
  • The US dollar extended its decline as investors scaled back bets that rising US interest rates would drive further dollar gain.
    • In addition, loosening lockdowns in China can boost global growth and commodity currencies.
    • The Fed has raised its benchmark policy rate by an aggregate of 75 basis points this year.
      • The central bank is also on track to increase it again in 50-basis point increments at each of the next two meetings in June and July.
    • St. Louis Fed President James Bullard maintained his view that the FOMC ought to raise interest rates to 3.5% this year to get high inflation under control.

The Russian Rouble

  • Rouble surges to 7-year high as gas buyers bend to Putin’s will.
    • The Rouble jumped as much as 9% against the Euro, hitting its strongest level since June 2015.
    • More European companies appeared to be complying with Vladimir Putin’s demand that they switch to paying in Russia’s currency for natural gas.
    • The Rouble jumped as much as 9% against the Euro and was up almost 5% against the dollar at 59.18 as of 1:35 p.m. in Moscow.
    • The Russian currency is the best performer against both globally this year. FX News
COVID-19 SOURCE https://www.worldometers.info/coronavirus/ Cases / Deaths / Recoveries
  • WORLD 527,799,480 / 6,300,434 / 498,043,072
  • USA 85,004,438 / 1,028,924 / 81,632,147
  • SA 3,929,872 / 100,933 / 3,739,543
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