Morning NOTE

GOOD MORNING

The ZAR gained  % after the Fed delivered an expected 75 bps rate hike.

• USDZAR 16.6500
• EURZAR 17.0300
• GBPZAR 20.2600

SOUTH AFRICA   

• President Cyril Ramaphosa , sought a series of commitments by labour unions and business, ranging from lower entry-level wages to an agreement to boost investment, as part of a plan to revive the nation’s struggling economy.
  • The proposals angered both parties because they contain stipulations they aren’t willing to meet.
  • In addition, they want the government to do more to confront immediate problems such as power outages and state corruption. Moneyweb
• South African farmers are expected to harvest 9.8% less maize in the 2021/2022 season compared with the previous season, the government’s Crop Estimates Committee (CEC) said on Wednesday.
  • The CEC’s latest summer crop forecast estimates the 2022 harvest at 14.713 million tonnes, down from the 16.315 million tonnes harvested last season. Agribiz
• Metalworkers union Numsa’s national congress – marred by legal action and chaos – has produced new leadership.
  • On Wednesday night, delegates at the event – which is viewed by some as taking place in contempt of a court interdict – nominated long-standing general secretary Irvin Jim and others unopposed. EWN

GLOBAL MARKETS

THE FED

• The FOMC  raised its benchmark Fed funds rate by 75 bps and raised the target range to 2.25-2.5% .
• it was the 4th consecutive rate hike and in turn pushed rate to the highest level since 2019.
• Chairman  Powell said he could not predict monetary policy range for next year and that next decisions will be data dependent.
• Powell also said the central bank will be looking for moderately restrictive level by the end of the year, meaning a 3% to 3.5% level for the fed funds rate. source: Federal Reserve

Stocks:

• In regular trading on Wednesday, the Dow gained 1.37%, the S&P 500 rallied 2.62% and the tech-heavy Nasdaq surged 4.06%.
  • All S&P sectors finished higher, led by communication services, technology and consumer discretionary stocks.
• Investors now await Q2 GDP due later today for clues on the state of the US economy, as well as more earning reports from major tech firms.
  • In Asian trading, the Dow and S&P 500 futures each shed about 0.1%, while Nasdaq 100 futures lost 0.3%.
    • In after-hours trading, Meta Platforms dropped 4.6% on disappointing quarterly results and forward guidance amid a weakening environment.

Bonds:

• US Treasury yields fell , fell below 2.8% mark.  It was a level not seen in two months, after the Federal Reserve hiked the funds rate by 75bps as broadly expected.
  • The demand for safe-haven assets persisted as Fed policymakers noted that spending and output have eased, furthering concerns of a sharp economic slowdown following a recent slew of poor economic data.
• Investors now turn to the long-awaited US GDP figure to be released on Thursday, which will give more insight into the state of the world’s largest economy.

YESTERDAY

• The Dow gained 436 points to 32,197
• The SP500 added 102 to 4,023
• The Nasdaq  added 469 to 12,032

Futures Trading:

• image : Trading economics

OVERNIGHT HEADLINES

• Asian markets higher after the FED delivered on its rate hike of 75 bps.
  • In Japan , the Nikkei 225 rose 0.36% to close at 27,815 . the index trading lower of an intra-day high following  post Federal Reserve gains from earlier in the session.
    • Investors remained cautious about the domestic corporate outlook.
    • The FOMC  raised rates by 75 basis points in a widely expected move on Wednesday, while Fed Chair Jerome Powell said it will likely become appropriate to slow the pace of increases at some point.
  • In Australia the ASX200 rallied 1% to 6,890 after the Fed delivered.
    • The index also gaining after Aussie inflation data printed lower than expected prompting markets to scale back the expected 75 bps hike from the RBA.
    • Technology stocks tracked a relief rally on Wall Street and  Mining and energy stocks also advanced on higher commodity prices, including BHP Group (2.5%).

• Crude oil

  • Spiked to 98/bl continuing on from a 2.4% rally in the previous session.
    • Falling crude inventories the catalyst as inventories dropped by 4.52million barrels.
      • Oil prices received an added boost after the US FED raised rates by 75 basis points in a widely expected move on Wednesday.
    • In addition, Fed Chair Jerome Powell said it will likely become appropriate to slow the pace of increases at some point.
      • Commodity markets have been gripped by fears that aggressive rate hikes could  lead to a demand destruction.
    • However, persistent supply-side issues and various disruptions kept the global market tight and energy prices elevated.
• Senate Majority Leader Chuck Schumer, and Sen. Joe Manchin, on Wednesday unveiled a long-anticipated reconciliation package for clean energy programmes.
  • The deal would see hundreds of billions of dollars invested to combat climate change and advance clean energy programs.
  • The legislation, called the “Inflation Reduction Act of 2022,” provides $369 billion for climate and clean energy provisions.
  • It will be the most aggressive climate investment ever taken by Congress.
  • The package would curb the country’s carbon emissions by roughly 40% by 2030, according to a summary of the deal.
• Gold rallied following a decline in treasury yields after the Fed hiked rates as expected by 75 bps.
  • Bullion reaching $1740/oz. The market perceived the comments to be less hawkish and risk assets rallied.
  • Gold rebounding after trading on the back foot against a rampant dollar the last few months.
    • In addition the WGC, (world golf council) lowered its forecasts for physical gold due to slowing demand in China and India.
    • Monetary policy remains a threat to the advancement in Gold prices. Kitco metals .

• The US Dollar

  • Weakened to 106.5 after the FED delivered on the widely expected 75 bps rate hike.
    • The Buck giving back some gains after Powell remained non-committal on the path of future rate hikes.
    • He confirmed that the decision would be data dependent and that the committee remains committed to bring inflation down to 2%
      • Powell said that it will likely “become appropriate to slow the pace of increases while we assess how our cumulative policy adjustments are affecting the economy and inflation.”
    • The Fed also noted that although the labour market remains strong, other economic indicators have softened.
      • Investors now turn their attention to US GDP data due later today to gain more insight into the state of the world’s largest economy.

• EUROPEAN MARKETS

  • Barclays posts profit slump after hit from costly trading error in the U.S.
  • The British bank reported a £1.071 billion ($1.30 billion) net profit attributable to shareholders for the second quarter — down 48% from the same period in 2021.
  • The British bank announced earlier this year that it had sold $15.2 billion more in U.S. investment products — known as structured notes — than it was permitted to.