Morning NOTE

GOOD MORNING

The ZAR strengthened on the back of a strong Risk asset rally on Wall Street on Friday.

• USDZAR 15.8300
• EURZAR 16.7200
• GBPZAR 19.4200

SOUTH AFRICA   

• BRICS : South Africa’s total trade with other BRICS countries has seen a 69% rise since last year.
  • President Cyril Ramaphosa emphasised the crucial role of the BRICS partners to help rebuild the country, especially in the wake of the COVID-19 pandemic.
  • Government said South Africa’s trade with other BRICS countries reached just over R700 billion last year, up from R487 billion in 2017. EWN

• ESKOM : Eskom announced that stage 4 power cuts would continue until Wednesday after workers failed to report for duty at various power stations.
  • South Africans are hoping that Eskom will provide more information on the fragility of the grid this week.
  • This following an unprotected strike that plunged the country into a weekend of darkness.
  • The unlawful strike action continues after a deadlock in wage negotiations between Eskom’s management and unions.
• In a bid to solve the crises, Eskom announced it selected 18 companies to develop renewable energy projects.
  • The power utility will lease parts of its land in Mpumalanga to the bidders for this purpose. Source : Eskom twitter

• Ninety One, SA’s largest  listed asset manager, with R2.8trillion AUM, said it was ready to swoop on cheaper shares after global rout.
• Despite consensus of a looing global recession, the manager said, that while it has trimmed the equity holdings in its general equity and balanced portfolios as part of a more defensive stance,
  • … it is already looking to buy quality stocks, which are suddenly looking cheaper thanks to the recent market mayhem. Businessday

GLOBAL MARKETS

Stocks:

• US stock futures continued its climbed higher on Monday after a major rally and the end of last week.
  • Investors trying to find their footing following this year’s sharp selloff.
  • Last week, the Dow bounced 5.4%, the S&P 500 rallied 6.5% and the Nasdaq surged 7.5%.
    • Mega gainers were Tesla (12.1%), Apple (8.9%), Microsoft (9.4%), Amazon (13.3%) and Nvidia (9.5%).
  • Investors continued to speculate whether stocks have found a bottom or undergoing a bear market rally.
  • Traders all expecting markets to remain volatile amid surging inflation.

• The 10-year US yield continued its recent decline towards the 3% mark, a level not seen in two weeks.
• Recessionary fears continued worry investors who climbed into safe-haven assets. Central bank actions of great concern.
• On Wednesday, Federal Reserve Chair Jerome Powell said that the central bank is fully committed to controlling prices, even at the risk of an economic slowdown.
• Money markets are now expecting 75-basis points rate increase in July, followed by a 50-basis points rise in September. Source : US treasury

• The Dow added 823 points to 31,500
• The SP500 added 116 points to 3,911
• The Nasdaq  gained 375 points  to 11,607

• image : Trading economics

• Asia Shares Rise were higher across the region, lifted by the rally on Wall Street on Friday.
  • The Hang Seng +3% and the Shanghai Composite hit a near 4-month peak, boosted by the biggest daily cash injection in near 3 months made by the PBoC.
    • Markets in South Korea, Japan, and Australia all were up over 1%, each.
  • In Japan, the Nikkei 225 gained 1% to around 26,760 and in turn extending last week’s rebound and tracking gains on Wall Street.
    • Investors bargain hunting and assessing if  stocks have found a bottom or undergoing a bear market rally.
    • Markets are also expected to remain volatile going forward as surging inflation, aggressive interest rate hikes and recessionary concerns continued to weigh on sentiment.
  • In China, The People’s Bank of China (PBoC) injected a total CNY 100 billion into the banking system.
    • It was the largest daily injection since March 31, to ease pressure from rising cash demand toward the end of the first half of the year.
    • The PBoC added more cash into the financial system last Friday, because demand usually surges towards the end of the quarter.
    • This is when commercial banks also have to shore up cash positions for an administrative quarterly health check by the central bank. Source : Reuters

• Crude continued its slide lower.
  • In early week trading, Brent crude fell below $112/bl as the G7 nations discussed a price cap mechanism on Russian oil.
  • Fears of a recession and a fall-off in demand also placing pressure on prices.
  • Oil was also headed for its first monthly decline since November as investors worry over a recession spurred by aggressive interest rate hikes worldwide to combat surging inflation.
  • Elsewhere, the US and Iran will reportedly restart talks over reviving a nuclear deal in the coming days, with the EU acting as a mediator.
  • WTI also trading at $107/bl. Source Energy news

• Gold rallied to $1835/oz, following reports of a potential ban on Russian Gold imports.
  • With Oil Russia have been able to continue to sell other commodities including Gold to raise revenue.
  •  The USA, along with the UK, Japan and Canada, considered the measure given London’s central role in the gold trade.
  • Traders viewed the move that could potentially have a global reach and negatively impact Moscow’s ability to raise funds.
  • This year (2022), Gold has come under pressure since March, due to Central banks raising rates across the world. Source : Kitco metals

• The US Dollar traded below 104 with recent declines tracking Treasury yields lower.
  • Yields dropping on safe haven buying due to growing concerns about a possible recession.
  • Fed Chair Jerome Powell said in a testimony to Congress that the central bank is fully committed to bringing prices under control.
  • He said this was a goal even at the risk of an economic downturn.
  • He acknowledged that a recession was “certainly a possibility,” reflecting market concerns that the Fed’s aggressive monetary tightening would hamper growth.
  • Powell also said that the Fed will keep raising interest rates following a 75 basis point increase last week with 2% inflation the objective of  the FOMC. Source : Bloomberg

• Ukraine- Russia
  • G-7 nations to announce import ban on Russian gold as Moscow sanctions widen.
    • The leaders of the G-7 nations will announce a ban on Russian gold imports for Moscow’s unprovoked invasion of Ukraine, U.S. President Joe Biden confirmed on Sunday morning.
    • The U.K. government on Sunday also confirmed the move to ban Russian gold imports, saying it would apply to newly mined gold and refined gold.
    • However, excluding gold that may have come from Russia but had already been exported.

• WORLD 549,031,174 / 6,350,924 / 524,036,717
• USA 88,794,286 / 1,040,805 / 84,513,615
• SA 3,992,036 / 101,731  / 3,887,400** We will continue to add the Covid stats only until 30 June 22, given the government’s decision to remove the face mask requirements.