Morning NOTE

GOOD MORNING

The ZAR weakened 1.80% to reach R17/$ following ultra-hawkish comments from Fed Chair Jerome Powell at the Jackson Hole symposium.

• USDZAR 16.9500
• EURZAR 16.8200
• GBPZAR 19.7600

SOUTH AFRICA   

• The Hawks arrested Brian Molefe and Anoj Singh after a deal was done with their attorneys.
  • This comes as former Transnet CEO Siyabonga Gama will return to court on Monday in an R93-million fraud and corruption case.
    • Gupta linked regiments’ shareholder Eric Wood and Trillian asset management director Daniel Roy are expected to return to the Palm Ridge Specialised Commercial Crimes Court.
    • The four suspects appeared in court last month but the matter was postponed for further investigation.
    • The case relates to a 2012 Transnet contract to secure R30 billion in funding for more than 1,000 locomotives. Moneyweb / EWN
• Walmart offers to buy out Massmart and delist.
  • The world’s largest grocer wants to buy the shares in the loss-making retailer it does not already own.
  • Majority owner Walmart has offered to buy all the shares in loss-making Massmart it does not already own.
  • If successful, it would delist from the JSE, with CEO Mitchell Slape stepping down at year-end.
    • Walmart would pay R62 a share, which is a 53% premium to the sale closing price on Friday. Business day live
• South African apple and pear exporters are eyeing expansion in the Indian market following the recent approval of in-transit cold treatment of the fruit arriving from SA. 
  • “Although India is still a relatively small market for us, we are excited about the prospects of growing our footprint.
  • With India’s population of close to 1.3 billion people, it is definitely a step in the right direction to aggressively grow this market,” says Roelf Pienaar of Tru Cape Fruit marketing.

GLOBAL MARKETS

Stocks:

• Global stock markets declined sharply on Friday and into early trading on Monday morning.
  • Losses on the back of remarks by Federal Reserve Chair Jerome Powell, who indicated the Fed’s commitment to bring down inflation is absolute.
    • He said higher interest rates even at the risk of some economic pain is needed to get inflation down to 2%.
• On Friday, markets erased all of August’s gains, with the Dow and S&P 500 losing 3.03% and 3.37%, respectively.
  • The tech-heavy Nasdaq Composite also fell sharply to  3.94% for its worst day since mid-June.
  • This morning  Dow futures fell 0.9%, S&P 500 futures dropped 1.1% and Nasdaq 100 futures tumbled 1.5%.

Bonds:

• The US 10YT  yield moved higher above the 3% mark to reach 3.11%,  after Fed Chair Powell reinstated the US central bank’s priority of bringing inflation down to the 2% level.
  • He added the Fed will continue to raise borrowing costs.
  • During his speech at the Jackson Hole symposium, Powell noted that restoring price stability could maintain growth at below trend levels and that job market conditions could soften.
• He added that borrowing costs may have to maintain a restrictive level for a prolonged time.
• The Fed remains determined to bring inflation down to 2% .

FRIDAY

• The Dow declined 1,008 to 32,283 (-3%)
• The SP500 fell 141 to 4,057  (-3.37%)
• The Nasdaq fell 497 to 12,141 (-3.94%)

Futures Trading:

• image : Trading economics

OVERNIGHT HEADLINES

• Asian markets sharply lower following the comments of Jerome Powell at the Jackson Hole central banker’s symposium.
  • In Japan, the Nikkei 225 fell nearly 3% to around 27,850, and in turn hitting their lowest levels in almost three weeks.
    • Fed chair Powell signalled higher interest rates for longer in a policy speech late last week.
  • Growth-oriented Japanese technology stocks were hit the most on Monday, with sharp losses from SoftBank Group (-3.7%).
    • In Australia, the ASX declined nearly 2%, to close at 6,966 on Monday. The ASX  sliding toward one-month lows and nearly wiping out all the gains made in August.
    • Powell signalled higher interest rates for longer in a policy speech late last week.
    • Locally Aussie data, showed Australia’s retail sales jumped 1.3% in July compared to June, accelerating at the fastest pace in four months and exceeding a 0.3% growth forecast. Reuters
       
• Brent crude oil traded at $101.35/bl, extending gains from last week.
  • Supply-side issues outweighed fears that aggressive central bank action against inflation would lead to a global economic slowdown and affect demand.
  • The Saudi threat of production cuts to stabilize volatile markets and counter the expected return of Iranian oil exports, given as the reason for a spike in prices.
  • However, even with the spike, oil is on track to decline for the 3rd straight month as recession fears have been rattling commodity markets since June.
  • At Jackson hole, US Fed Chair Jerome Powell on Friday stressed the need for higher interest rates to bring inflation under control even at the risk of some economic pain. Gulf energy news
     
• Gold declined to $1723/oz after comments from US Federal Reserve Chair Jerome Powell delivered a stern commitment to combat inflation with higher interest rates.
  • Powell’s comments in a policy speech at the Jackson Hole conference late last week warned strongly against prematurely loosening policy amid data showing possible signs of peak inflation.
    • He noted of significance, that the Fed’s focus is broader than a month or two of data and that it will continue pushing ahead until inflation moves down closer to its 2% target.
  • Over the weekend, ECB policymakers also made the case for a more aggressive response against surging inflation, and are reportedly discussing a bigger 75 basis point rate hike in September.
  • While gold is widely considered as a hedge against inflation and economic uncertainties, higher interest rates raise the opportunity cost of holding non-yielding bullion, denting its appeal. Kitco metals
     
• The US Dollar moved past the 109 mark, and in turn trading at its highest levels in 20 years, after Federal Reserve Chair Jerome Powell delivered a stern commitment to bring down inflation.
  • Powell said the FOMC remains committed and will keep interest rates higher for longer to get inflation down to 2%.  
  • He also warned strongly against prematurely loosening policy amid data showing possible signs of peak inflation, noting that the Fed’s focus is broader than a month or two of data.
    • The key theme :  inflation needs to be at the 2% target.
  • He also acknowledged that the fight against inflation may cause some economic pain, but warned that “failure to restore price stability would mean far greater pain.”
     
• JACKSON HOLE
  • The world’s top Central Bankers Deliver a Hawkish Message at Jackson Hole.
    • ECB officials also vow to act ‘forcefully’ to curb red-hot prices after comments from Jerome Powell.
  • On Saturday Fed Governor Michelle Bowman said she supports the central bank’s recent 75 basis point rate increases.
  • She added, the FED should continue until inflation is subdued.
    • Also, her view is that similarly sized increases should be on the table until we see inflation declining in a consistent, meaningful, and lasting way
    • Markets are anticipating a third straight big increase when the central bank meets again in September.