Morning NOTE

GOOD MORNING

• USDZAR 15.6900
• EURZAR 16.8000
• GBPZAR 19.6700

SOUTH AFRICA   

• Ramaphosa maintains, Raymond Zondo was the best person for chief justice as EFF presses him for ignoring JSC’s choice.
  • In March, Ramaphosa appointed Zondo, even though the JSC recommended Mandisa Maya.
  • Ramaphosa subsequently nominated Maya for deputy chief justice. NEWS24

• Load shedding continues to destroy SA businesses with reports of multiple small businesses being forced to close.
  • Despite a recent uptick in Covid-19 cases, possibly linked to a fifth wave of infections, hospital admissions throughout South Africa remain relatively low. BI
  • Also, while hospitals are no longer inundated with Covid-19 cases, they’re now needing to compete with the country’s socio-economic shortfalls.
  • In addition, leading healthcare provider Netcare, cited load shedding, rising fuel costs and a nurse shortage as key risks to its business model.
• The KZN floods continue to wreak havoc as news emerged that municipal employees went missing during the heavy floods this weekend.
  • It is understood that their vehicle has been spotted in a river near Osindisweni.
  • Officially the death toll stands at 400, with property damage in the billions of Rands. IOL
• South Africa’s middle class is having to make major adjustments as the rising costs of fuel, food prices and interest rates impact their way of life.
  • Soaring prices of food, fuel and electricity among other items have been exacerbated by the Ukraine-Russia war.
  • In addition, the fall in stock markets and the pandemic continues to add to uncertainty.
  • Families and individuals say that they are quickly running out of options as salaries have not grown at the same rate as inflation for many years. EWN

GLOBAL MARKETS

Stocks:

• US stock futures rose on Wednesday after technology shares sold off overnight.
  • Sentiment remains fragile following a warning from Snap that it will miss its own earnings and revenue targets.
• This morning, futures contracts tied to the three major indexes were all trading in positive territory.
  • In regular trading on Tuesday, the tech-heavy Nasdaq dropped 2.35%.
    • Adding to the uncertainty was Tesla, that continues to nosedive.
    • Rumours of Elon Musk needing to sell Tesla stock to fund the Twitter purchase continues to weigh on the price.
      • Tesla traded at $627.84 this Tuesday May 24th, decreasing $47.06 or 6.97 percent since the previous trading session.
      • Looking back, over the last four weeks, Tesla lost 37.09 percent. 

• Yields continue to fall as investors look for the safety of government backed bonds.
  • Core government debt witnessed heavy buying pressure as investors rushed into safe-haven assets.
  • This even as lingering concerns that soaring inflation and an aggressive tightening from central banks could tip developed economies into a recession.
  • 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 2.72%.
  • Meantime, Germany’s 10-year Bund yield, the benchmark for Europe, bottomed below 0.95%. source: U.S. Department of the Treasury

• The Dow added 48 points to 31,928
• The Sp500 fell 32 to 3,941
• The Nasdaq  declined 270 to 11,265

• image : Trading economics

• Asian markets mixed with Japan lower and Australia & China higher.
  • In Japan, the Nikkei 225 fell 0.26% to close at 26,678, extending losses from the previous session and taking cues from a tech sell-off on Wall Street.
    • Investors dumped stocks in the digital advertising space after Snap warned that it will miss its own earnings and revenue targets.
      • SoftBank Group declined 1.7%, along with other technology stocks.
      • Elsewhere, a Reuters poll showed that analysts expect the Nikkei share index to climb over 7% to 29,000 by year-end.
      • Reasons given were Japan’s economic reopening, receding worries about Covid-19 and attractive valuations.
  • In Australia, the ASX 200 Index rose 0.37% to close at 7,155 on Wednesday, as gains in financial and gold stocks outweighed losses in the technology sector.
    • Australian banks jumped as rising interest rates lifted the outlook for the sector, with strong gains from Commonwealth Bank (1.1%)
    • Gold miners also advanced on higher Gold bullion prices.
• Crude oil rallied to hit $111/bl.
  • The rally erasing losses from the previous session on the prospect for even tighter global supplies and expectations of stronger demand.
    • The new French foreign minister said, those opposing the EU sanctions on Russian oil could be convinced to change their stance.
      • If successful the deal threatens to tighten global supply further.
    • Across the pond, travel during the US Memorial Day weekend is also expected to keep upward pressure on oil prices.
    • In addition, more American drivers are expected to hit the road and shake off Covid restrictions. Energy news
• Gold stabilised around $1,860/oz on Wednesday after climbing for five straight sessions.
  • Traders citing, lower yields keeping the dollar under pressure.
  • Meanwhile, gold held near two-week highs scaled on Tuesday as investors hedged against surging inflation and a challenging growth outlook.
  • Safe haven buying also a factor, as the war in Ukraine escalates to the eastern flank of the country. Kitco metals
• The US dollar declined to 102 on Wednesday on the back of falling US Treasury yields.
  • The dollar faced pressure in the past two weeks and tracked broad declines in Treasury yields.
  • Traders citing fears that aggressive Federal Reserve rate hikes could tilt the US economy into recession.
  • Atlanta Fed President Raphael Bostic warned that headlong rate hikes could create “significant economic dislocation”.
    • He urged his colleagues to “proceed carefully” in an essay published Tuesday.
  • Investors now await minutes of the latest central bank meeting for fresh clues on the likely path for monetary policy.
  • Analysts also suggested that if inflation reads started showing signs of moderating, that could open up the possibility of a Fed pause. FX news
• The Euro extended gains to above $1.0700, the highest in 4 weeks.
  • The move after ECB President Christine Lagarde said the ECB is likely to exit negative interest rates by the end of the third quarter.
  • Traders were already boosting bets for higher borrowing costs after hawkish comments from ECB Knot and ECB Villeroy de Galhau last week. FX news

Ukraine-Russia

• Russia is now exposed to a historic debt default.
• Up until Wednesday, the U.S. Treasury Department had granted a key exemption to sanctions on Russia’s central bank.
  • The exemptions allowed it to process payments to bondholders in dollars through U.S. and international banks, on a case-by-case basis.
  • Adam Solowsky, partner in the Financial Industry Group at global law firm Reed Smith;
    • … said “… Moscow will likely argue that it is not in default since payment was made impossible, despite it having the funds available…” CNBC
• Ukraine’s President Volodymyr Zelenskyy has said the situation in the Donbas in eastern Ukraine is “very difficult”.
  • Russian forces are concentrating their fire and manpower on assaulting the region and seizing key cities there.

• WORLD 529,160,159/ 6,303,961 / 499,667,494
• USA 85,241,016 / 1,029,524 / 8,764,911
• SA 3,935,761 / 101,002 / 3,780,159
  • **SA 50 new deaths