Morning NOTE

GOOD MORNING

• USDZAR 15.7400
• EURZAR 16.8100
• GBPZAR 19.7800

SOUTH AFRICA   

• Eskom CEO, Andre de Ruyter blames government policies for exacerbating blackouts.
  • De Ruyter says the utility can’t build power stations without Energy Department approval.
    • He says a lot more power needs to be added to the grid.
    • This is the only way to address the energy crisis and added to this he pointed to historic delays in the use of Independent Power Producers.
  • He said, “load shedding will end when we have substantial new energy added to the grid.”
  • He made it clear, that Eskom on its own can’t go and build new power stations because they are required to apply for a section 34 determination from the Mineral Resources Department and Energy.” ENCA

• Mineral Resources and Energy minister, Gwede Mantashe, has warned that a growing tendency by mining executives to “insult the state” is detrimental to the resources sector.
  • Mantashe on the attack when addressing the Minerals Council South Africa ahead of the industry body’s AGM on Wednesday. IOL
  • “Such executives have no regard for the industry’s international ratings and its relations with government which makes it difficult to process industry issues,”
  • “We have observed a growing temptation by strong and powerful mining executives to insult the state.”
• South African Federation of Trade Unions (Saftu) general secretary Zwelinzima Vavi survived a battle for political survival and was re-elected to the position.
  • Vavi has avoided being suspended from a second labour federation that he leads in the space of a decade after his re-election. EWN

GLOBAL MARKETS

Stocks:

• US stock futures declined as investors digested disappointing quarterly reports from the technology sector.
• Futures contracts tied to the three major indexes shifted between gains and losses.
• Big tech chip maker, Nvidia dropped 7% in extended trading after the chipmaker delivered weaker-than-expected earnings for the second quarter and said it would slow hiring.

In addition, last night the Fed minutes revealed;

• Fed officials are prepared to move ahead with multiple 50 basis points interest rate increases.
• In addition, the Federal Open Market Committee said policy may have to move past “neutral” and into “restrictive” territory.
• The minutes indicate that members are hopeful they can bring down inflation, but also concerned about financial stability risks.

• The 10-year US Treasury yield, was relatively unchanged at the 2.75% level as investors.
  • The yield widely, sets the tone for corporate and household borrowing costs worldwide.
  • Fed officials policymakers showed strong consensus in backing a 50bps rate hike in the last meeting.
  • In addition, most participants agreed 50bps in the coming meetings would be appropriate as inflation risks are skewed to the upside.
  • Still, the magnitude of tighter monetary policy for the rest of the year remains unclear, owing to high uncertainty due to the war in Ukraine. source: U.S. Department of the Treasury

• The Dow  added 191 to close at 32,120
• The SP500 added 37 to close at 3,978
• The Nasdaq  gained 170 to close at 11,434

• image : Trading economics

• Asian markets lower, and not following through on the Wall Street rally.
  • Japan, China and Australia ignoring the New York optimism.
    • In Japan, the Nikkei retreated after initially rallying. The Index at 26,677 or -0.26% in morning deals on Thursday.
    • After the release of the FOMC’s May meeting minutes showed no signs that policymakers could turn more hawkish to curb rising inflation.
  • In Australia, the ASX 200 Index fell 0.69% to close at 7,105 on Thursday, as losses in commodity stocks outweighed a rebound in the technology sector.
    • Mining and energy stocks dragged the market lower on easing commodity prices and as investors locked in profits following a strong rally.
    • Losses in the sector were led by Rio Tinto (-1.1%), Fortescue Metals (-3.7%).

• Crude oil WTI crude futures edged up toward $111/bl extending a cautious rally this week on signs of ongoing supply tightness, while the EU continues to haggle with Hungary over plans to ban oil imports from Russia.

  • Official data showed a larger-than-expected drawdown in US crude inventories last week due to soaring exports, highlighting a tight global market.
  • The prospect of an EU embargo on Russian oil also kept upward pressure on crude prices, with EU saying he is confident that an agreement can be reached before the council’s next meeting on May 30.
  • Hungary is pressing for about 750 million Euros to upgrade its refineries and expand a pipeline from Croatia to enable it to switch away from Russian oil.  Energy News
• Gold weakened past $1,850 /oz on Thursday, extending losses in the previous session.
  • Minutes of the last Fed policy meeting showed the central bank was likely to stay the course on aggressive rate hikes.
    • Fed officials are prepared for half-point rate increases at each of the next two meetings in June and July to get on top of inflation, the minutes showed.
    • They further noted that policy may have to move past a “neutral” stance and into “restrictive” territory depending on the evolving economic outlook and the risks to the outlook.
    • The hawkish Fed minutes supported the dollar, pressuring greenback-priced bullion further.
    • Meanwhile, Fed officials expressed concern that tighter policy could cause instability in both the Treasury and commodities market. Kitco metals
• The US Dollar recovered to consolidate above the 102 mark as investors reassessed the outlook of tightening monetary policy from the Federal Reserve.
  • Minutes from the May meeting showed all participants backed a half-percentage-point interest rate increase to tame sky-high inflation.
    • However, policymakers failed to provide a clear picture of the Fed’s aggressive tightening path this year.
  • In addition the Euro consolidated to above $1.0700, the highest in four weeks.
    • The rally after ECB President Christine Lagarde said the central bank is likely to exit negative interest rates by the end of the third quarter. Fx News

Ukraine-Russia

• Russia ‘ready to allow grain shipments if sanctions lifted’ –
  • The news were reported by the Interfax news agency cited Russian deputy foreign minister Andrei Rudenko as saying.
  • Ukraine’s Black Sea ports have been blocked since Russia sent thousands of troops into Ukraine in February.
  • More than 20m tonnes of grain are stuck in silos in the country, raising concerns about famine in countries dependent on the supplies. BBC
• Zelenskyy condemns Kissinger idea for negotiations with Russia as 1938-style appeasement.
  • Ukrainian President Volodymr Zelenskyy has made a blistering attack on former US Secretary of State Henry Kissinger.
  • Kissinger suggested on Tuesday that peace negotiations should be aimed at creating borders along the “line of contact” in Donbas as it existed on the eve of the Russian invasion.
    • Zelenskyy said, “No matter what the Russian state does, there is someone who says: ‘let’s take into account its interests.
    • Despite the destroyed cities. “Russia has done all this in Europe.”
    • But still, in Davos, for example, Mr. Kissinger emerges from the deep past and says that a piece of Ukraine should be given to Russia.” Davos – CNN

• World 529.841,516 / 6,306,400 / 500,335,301
• USA 85,440,340 / 1,030,415 / 81,851,405
• SA  3,941,045 / 101,043 / 3,784,9258