Morning NOTE

GOOD MORNING

The ZAR retreated in overnight trading after US stocks retreated following weak corporate earnings on Wallstreet.

• USDZAR 15.8200
• EURZAR 16.8700
• GBPZAR 19.8800

SOUTH AFRICA   

• A woman has been arrested in connection with the contract awarded to controversial company Digital Vibes.
  • The person an employee of the Municipal Infrastructure Support Agent (MISA) was arrested on Tuesday morning.
  • She is expected to appear in the Pretoria Commercial Crimes Court. News24

• The City of Johannesburg are debating how to reduce the country’s largest city from its dependence on Eskom for electricity.
  • Joburg’s City Power, said that the Kelvin power station currently supplied it at a cheaper rate compared to Eskom.
    • City Power also said that the involvement of more independent power producers would drive costs down.
    • due to innovative solutions and better efficiency, they are able to sell it to us at a cheaper rate and they’ve proven it with Kelvin. EWN
  • Currently Joburg obtains 90% of electricity from ESKOM and 10% from a Kelvin power station, an IPP ( independent power producer).
• After announcing his willingness to run for the ANC presidency at the end of the year, the ANC veterans have hit back against Mkhize.
  • The ANC’s veterans’ league and party national executive committee (NEC) members have warned party members, including former health minister Zweli Mkhize.
  • The warnings are against making declarations of willingness to contest the ANC presidency before the party declares nominations for positions open. News 24

GLOBAL MARKETS

Stocks:

• US stocks rebounded on Monday after Biden’s comments that China tariffs imposed by Trump are being reviewed.
• Investors now look ahead to a speech from Jerome Powell on Tuesday and the latest Fed minutes on Wednesday.
• At one stage all 11 sectors of the SP500 were trading higher.
• However, following a strong rally Snap (owners of Snapchat) informed the market of negative earnings guidance, sending markets in a tailspin lower.
  • Tech giants all lower on the news.

Bonds:

• The US 10-year yield, consolidated above 2.80% as investors reassessed the outlook of tightening monetary policy.
  • The US Central Bank has raised its benchmark policy rate by half a percentage point for the first time since 2000 in early May.
  • The Fed also signalling it intended to increase it by the same amount at the next two meetings.
  • Traders now turn their attention to the FOMC minutes on Wednesday .
    • The minutes will give an idea of the language used by Fed officials and guidance to future Fed policy. source: U.S. Department of the Treasury

YESTERDAY

• The Dow rallied 618 to 31,880
• The SP500 gained 72 to 3,973
• The Nasdaq added 180 to 11,535

Futures Trading:

• image : Trading economics

OVERNIGHT HEADLINES

• Asian markets all lower following weak earnings guidance in New York. After a strong session in regular trading, Stocks futures all pointing to a lower European open.
  • In Japan, the Nikkei 225 Index fell 0.94% to close at 26,748, giving up gains from the previous session, as Japanese technology stocks tracked US futures lower .
    • Snap warned of a hit to its top and bottom-line figures amid deteriorating macroeconomic trends.
    • Investors also assessed latest data showing Japan’s manufacturing activity expanded at the slowest pace in three months.
    • Also, Toyota Motor company, edged lower by 0.6% after the automaker sharply cut its global production plan due to the semiconductor shortage.
  • In Australia, the ASX 200 Index slipped 0.28% to close at 7,129 as Australian technology stocks tracked US futures lower, following the Snap warning.
    • Investors also watched for market reaction after President Joe Biden floated the idea of tariff cuts on Chinese goods.
    • This as the US announced the Indo-Pacific Economic Framework with Asian partners including Australia, Japan and South Korea. 
• Crude oil traded below $110, as concerns over a possible global recession and a challenging demand outlook weighed on oil prices.
  • The WEF in DAVOS taking centre stage ( with highlights below).
    • Investors also worried that elevated oil prices could dent consumption for fuels worldwide.
      • Concerns over tight global supply and hopes for demand return in China provided some support to crude prices.
      • Chinese demand is also expected to pick up as Shanghai prepares to reopen and authorities ramped up policy support.
        • The head of Saudi Aramco told Reuters the world is facing a major oil supply crunch as energy firms are afraid to invest in the sector as they face green energy pressures.
    • Political and business leaders flagged the risk of a worldwide recession amid multiple threats.
      • IMF Managing Director Kristalina Georgieva said she did not expect a recession for major economies but could not rule one out.  Energy News
• Gold held steady around $1,855 an ounce on Tuesday after hitting 2-week highs on Monday.
  • Recent weakness in US economic data and corporate earnings, as well as fears of a possible worldwide recession also prompted investors to hedge with the metal.
  • Gold is still seen as a safe store of value during times of economic crises.
  • Meanwhile, investors remained cautious over aggressive interest rate hikes by the US Federal Reserve.
  • Kansas City Fed Bank President Esther George said Monday she expects the US central bank to lift its target interest rate to 2% by August.
    • In addition, high inflation environments always attract gold as a store of value against the erosion of purchasing power of Fiat currencies. Kitco metals
• The US dollar retreated to 101.00 after the broad-based rally on Wallstreet as investors flocked back into risk assets as well .
  • The Dollar however recovering (102) in early Asian trading on the back of a general risk-off mood in the markets.
  • Risk off after US stock futures fell after social media firm Snap warned of a hit to its top and bottom-line figures amid deteriorating macroeconomic trends.
  • However, having peaked at a nearly 2-decade high above 105 earlier this month, the dollar has been falling broadly alongside a decline in Treasury yields.
  • Analysts citing aggressive easing by the Federal Reserve already priced in.  Fx news

Ukraine-Russia

• Following the struggle of Europe trying to divest from Russian oil and gas dependencies, an unlikely source have stepped forward.
  • Spain paints itself as the answer to Europe’s Russian energy problem.
    • Spanish Prime Minister Pedro Sanchez has said his country as well as southern Europe could provide an answer to the shortfall in gas supplies from Russia.
    • Sanchez highlighted that Spain represents 37% of the European Union’s total regasification capacity
      • Where liquefied natural gas is turned back into the end product of natural gas.
    • The issue of energy security as well as soaring energy prices, continues to be front and centre in the political debate in Spain. CNBC

COVID-19 SOURCE https://www.worldometers.info/coronavirus/

Cases / Deaths / Recoveries

• WORLD  528,387,922 / 6,301,925 / 498,808,288
• USA 85,113,962 / 1,029,121 / 81,701,524
• SA 3,931,534 / 100,952 / 3,739,543