The ZAR weakened in Tuesday trading, on the back of a weaker EURO and position covering ahead of the FOMC tonight.
- The Rand weakened from 16.6950 to reach 16.9700 (minus 1.64%), as traders exercised caution ahead of the FED rate decision tonight (20h00 CAT).
- Although the 75 bps are widely expected, investors remain nervous ahead of the press conference and Fed statement.
- Any language on the hawkish side, likely to send risk assets lower.
- Softer data continues to print across the world’s largest economies, increasing the probability of a global recession.
- Households citing fears of a recession and concerns over the supply of natural gas as Europe approaches its autumn and winter seasons.
- Earlier this morning, German consumer confidence fell to a new record low at -30.6% vs -27.7% previously.
- The flip side, is that GLOBAL INFLATION REMAINS STUBBORNLY HIGH.
- Also, this morning Australian Q2 inflation set a 21 year high at 6.1% vs 5.1% in Q1. (** the highest since 2001).
- The market expected 6.2%.
- Traders remain in a cautious i.e. Risk off mode, ahead of the FOMC.
On the data calendar;
- 20h:00 US FED RATE DECISION ( +75 BPS EXEPCTED)
- 20H30 : FOMC MEDIA STATEMENT ( NB: Much attention will be given to the language as to the Fed’s future rates trajectory).
- 11h30 : SA PPI (producer inflation ) MOM +1.7% EXPECTED vs PREVIOUS 1.8%
- 11h30 : SA PPI (producer inflation ) YOY +15.8% EXPECTED vs PREVIOUS 14.7%
- 14H30 : US GDP GROWTH 0.4% EXPECTED vs – 1.6% PREVIOUS
- 14h00 : SA TRADE BALANCE FOR JUNE : +R29.5BN EXPECTED VS +R28.35 PREVIOUS
- This morning we expecting a weaker opening as the ZAR tracks the Euro ahead of tonight’s FED meeting.
- The Single currency (the Euro), once again hammered by markets, due to geo-political tensions.
- Last week’s ECB rate providing support only for Russia to cut Nordstrom to 20% sending Gas prices through the roof.
- Fears of gas shortage in Europe’s largest economy (Germany) sending the Euro into a nose-dive (-1.46%)
However : IT IS IMPORTANT TO NOT LOSE SIGHT OF THE FED , AS US RATES REMAINS THE LONG TERM DRIVER OF ASSET PRICES.
- USDZAR : Expect a range 16.7700-17.0000
- Importers 16.8400-16.7700
- Exporters 16.9300-17.0000
- EURZAR : Expect a range of 16.9500-17.2800
- Importers 17.0100-16.9500
- Exporters 17.1800-17.2800
- GBPZAR : Expect a range of 20.1700-20.5300
- Importers 20.2700-20.1700
- Exporters 20.1700-20.5300
- USDZAR 16.8900
- EURZAR 17.1300
- GBPZAR 20.3600
- Telkom is taking President Cyril Ramaphosa to court over the probe he ordered into alleged malfeasance at the telecoms provider.
- Ramaphosa asked the Special Investigating Unit (SIU) in January to investigate reports of corruption at the semi-state owned company
- Telkom has now filed papers at the North Gauteng High Court to stop the investigation into its African operations dating back as far as 2006. EWN
- Eskom will starting buying power from private producers to boost the national grid.
- This was one of the new energy measures announced by President Cyril Ramaphosa on Monday night as he tries to bring an end to rolling power cuts.
- As well as setting up a new energy crisis committee, the plan is to bid for more renewable energies,
- In addition, it was lifting licensing requirements for private power producers and to allow solar-powered homes to sell excess electricity back to Eskom. Moneyweb
- SA’s major JSE-listed food retailers continues to play their part in trying to shield already compromised consumers from spiking food.
- Shoprite Group, Pick n Pay and Woolworths, in trading updates released on Tuesday, reported maintaining internal selling price movements below the recorded consumer price index (CPI) food inflation rate.
- The latest CPI print came in at 8.6% for June. SENS
- In regular trading on Tuesday, the major stock market averages all declined on the back of mixed corporate results as companies grappled with:
- recession fears,
- surging inflation,
- and supply chain disruptions.
- Asian trading saw US stock futures rebounded, ahead of the latest Federal Reserve interest rate decision.
- Contracts on the tech-heavy Nasdaq 100 rallied 1.4%, while Dow and S&P 500 futures gained 0.4% and 0.8%, respectively.
- Mega tech reported and Alphabet (parent of Google) jumped 4.9% in extended trading as the firm’s revenues remained solid despite a challenging outlook for the online advertising industry
- Microsoft also gained 4% on a strong sales forecast.
- Investors now look ahead to more quarterly reports and the Fed’s policy updates.
- The US Treasury 10-year yield fell below the 2.8% mark.
- Investors rushed to safe-haven assets on the back of fears of a pending recession due to aggressive tightening worldwide .
- The US business activity contracted in July for the first time in nearly two years, pressured by a sharp slowdown in the service sector, clouding a market outlook darkened by soaring borrowing costs.
- The Fed has already raised benchmark short-term borrowing rates by 1.5 % this year, with another 75 bps hike in July regarded as inevitable.
- The result is a buying a US bonds, widely regarded as safe haven assets.
- While such an aggressive tightening should be the key to bringing down inflation, investors have grown concerned that it will also tip the world’s largest economy into a recession.
- The Dow declined 228 to 31,761
- The SP500 fell 45 to 3,921
- The Nasdaq closed lower by 220 to 11,562
- image : Trading economics
- Market mixed as stocks trade higher in the east.
- After hours earnings from mega tech, surprised sentiment to the upside after both Microsoft and Alphabet reported positive results.
- In Japan, The Nikkei 225 rose 0.22% to close at 27,716 reversing losses from earlier in the session,
- It was helped by heavyweight chip-related stocks amid efforts by the Japanese government to support domestic chip production.
- However, traders remain nervous ahead of the US Federal Reserve policy decision where it is expected to deliver another 75 basis point rate hike to combat inflation.
- Chip makers leading gains .
- In Australia, the ASX 200 climbed 0.23% to 6,823, after the latest inflation data came in slightly below expectations.
- This prompted markets to scale back bets for a bigger 75 basis point rate hike from the RBA next month.
- Australia’s annual CPI jumped 6.1% in the three months to June, missing a consensus forecast of 6.3%.
- Investors are also preparing for an expected rate hike from the US Federal Reserve on Wednesday. REUTERS
- Crude WTI crude prices increased above $95/bl as an industry report pointed to a large drop in US crude inventories.
- API data released late on Tuesday reportedly showed that US crude stockpiles declined by 4 million barrels last week.
- It was much higher than the 1 million barrel drop expected by analysts in a Reuters poll.
- Concerns that reduced gas supplies from Russia to Germany through the Nord Stream 1 pipeline would force a switch to oil also kept upward pressure on prices. ENERGY NEWS
- Gold Rallied to $1720/oz as investors prepared for the FOMC tonight.
- The Dollar rallied to 107.15, as investors prepare for the outcome of the Federal Reserve’s policy meeting.
- The Fed is expected to raise interest rates by another 75 basis points on Wednesday.
- However pushing back versus earlier speculations of a larger 100 basis point increase.
- Markets will be watching Fed Chair Jerome Powell’s comments after the meeting for clues on the likely path for US monetary policy
- NB: A hawkish surprise could stoke another Dollar rally.
- Meanwhile, US consumer confidence fell sharply in July, highlighting fears of slowing growth ahead of Q2 estimates of US GDP due on Thursday. FOREX NEWS
- US natural gas prices traded above the $9.7/MMBtu, a level not seen since July 2008.
- Traders citing higher domestic and international demand being the primary driver.
- This summer, many regions in the United States have experienced extreme heat, with demand for electricity reaching several record highs.
- Soaring international demand is also adding to the bullish outlook.
- Russia’s Gazprom said it would reduce flows through the Nord Stream pipeline.
- The company citing issues with turbines, delivering only 33 million cubic meters daily, roughly 20% of its capacity, forcing European buyers to find replacements. BLOOMBERG