Morning NOTE

GOOD MORNING

The ZAR consolidated inside the weaker range of 15.8000-15.6000, ignoring the rebound in Risk.

OPENING RATES

• USDZAR 15.7000
• EURZAR 16.8500
• GBPZAR 20.0200

SOUTH AFRICA   

• The KwaZulu-Natal government said it had made an “honest mistake” when it estimated that the cost of repairing flood damage would be R950 billion.
  
  
  • The cost has been revised down to R17 billion.
  • The admission of the error had Anti-corruption campaigners raising warning signs of more corruption following the pandemic.
  • In addition, Prasa said it has lost an estimated 300km of rail infrastructure in the province. News24
• SA motorists are welcoming a petrol price cut.
  
  
  • However data from the central energy fund indicates the price hikes are far from over.
  • Both Diesel and Petrol remains under pressure as the ZAR started to weaken and oil prices are once again above $100/bl

GLOBAL MARKETS

Stocks:

• US stock futures drifted lower on Tuesday after Wall Street started the week on a positive note.
• Traders looking forward to earnings reports from big tech firms.
  
  
  • In regular trading on Monday, the major averages reversed early losses to close higher, led by the Nasdaq Composite’s 1.3% rise, while the Dow and the S&P 500 gained 0.7% and 0.6%, respectively.
• The moves came as tech names rallied in the afternoon amid falling bond yields and ahead of an intense week of earnings for mega cap tech stocks.
• Twitter also jumped 5.7% after its board accepted Tesla CEO Elon Musk’s offer to take it private.

NB:  Traders await fresh PCE inflation data due Friday to guide the outlook for monetary policy.

Bonds:

• The 10-year US yield declined toward 2.8%, retreating from an over 3-year high of 2.98% hit last week.
  • Fed policy tightening for now remains a concern. Yields lower after investors piled back into safe-haven bonds.
    
    
    • Analysts also flagged concerns on whether the US and global economy can withstand an increasingly hawkish Fed and the commodity-shock caused by the Russia-Ukraine war.
  • US Treasury yields remained near multi-year highs as Fed Powell indicated last week that the central bank is committed to raising rates “expeditiously” to bring down inflation.

YESTERDAY

• The Dow added 238 to 34,049
• The SP500 added 24 to 4,296
• The Nasdaq  added 165 to 13,004
• image source: Trading Economics

OVERNIGHT HEADLINES

• Asian markets traded mixed  on the back of a higher close on Wallstreet.
  
  
  • In Japan, the Nikkei 225 rose 0.4% to close at 26, recouping some losses from the previous session.
    
    
    • Musk buying Twitter sent tech stocks higher, as Japanese technology stocks tracked overnight gains on Wall Street.
    • China however remains a concern.
  • In China, the Shanghai market initially rose 0.5% to around 2,944, before declining 1.25% to 2,892 , after facing accelerated selling in the previous session.
    
    
    • The PBoC said it will keep liquidity reasonably high to ensure stable financial markets and provide support for the nation’s Covid-afflicted economy.
    • The bank also said it will add 100 billion Yuan in relending to support coal development and increase storage capacity.
    • On Monday, the benchmark indexes each plunged more than 5% on fears that Beijing may join Shanghai in Covid lockdowns.  TE

• Crude oil gained  1% to $99.0/bl  after a 2-day decline as investors reassessed the impact of China’s worsening Covid situation on the outlook for global demand.

  • Traders ignoring the PBoC pledge to increase support for the economy.
  • However authorities in Beijing expanded virus testing to most of the city, raising concerns about a lockdown of the capital.
  • Energy analysts however firmly of the opinion, that the supply picture remains tight and that bargain hunters appeared to be taking advantage of sharp falls in oil prices. Energy news
• Gold bounced back above $1,900/oz after a 3-day slide that drove prices below the key psychological level.
  
  
  • Gold recovering after a dip in the US dollar as Treasury yields drifted lower.
  • Investors are also monitoring a worsening Covid situation in China after authorities in Beijing expanded virus testing to most of the city.
  • Adding to Gold’s safe haven appeal, Russia told the world not to underestimate the considerable risk of nuclear war.
    
    
    • Foreign minister, Lavrov, said it wanted to reduce and warned that conventional Western weapons were legitimate targets in Ukraine. Kitco metal
• The US dollar eased from a 2-year high scaled in the previous session,
  
  
  • On the back of a retreating US yields, down from 3-year highs as investors weighed expectations of faster Fed policy tightening.
    
    
    • The dollar steadied at 101.7 on Tuesday after hitting a fresh 2-year high in the previous session.
    • Fed Chair Jerome Powell said last week the central bank is committed to raising rates “expeditiously” to bring down inflation.
  • In Europe, the euro weakened to below $1.075 against a dollar, and failed to get a boost from pro-EU Macron’s re-election.
    
    
    • Risk sentiment remains clouded by the war in Ukraine that is entering the third month, surging European inflation. FX news

RUSSIA / UKRAINE

• In conflicting statements, Russia said the threat of Nuclear War remains real, but that it could also be exaggerated by the West.
  
  
  • Foreign Minister Sergei Lavrov stressing the risks should not be underestimated.
    
    
    • And said ; “… the  Risk of nuclear war now ‘very, very significant…”
  • But later added that there was a danger the risks were being “artificially” inflated.
• In addition, US  Defence Secretary Lloyd Austin, said, Washington wants to see Russia “weakened” as it arms and supports Ukraine, following a visit to Kyiv.
  
  
  • It was the first high-level visit to Ukraine from a U.S. official since the war began.

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

Cases / Deaths / Recoveries

• WORLD 510,116,702 / 6,245,643  /463,415,800
• USA 82,733,863 / 1,018,582 / 80,506,936
• SA 3,764,865 / 100,333 / 3,634,446