Morning NOTE

GOOD MORNING

The ZAR weakened on the back of Eskom stage 6 and more Hawkish Fed comments.

• USDZAR 16.2500
• EURZAR 16.9900
• GBPZAR 19.7100

SOUTH AFRICA   

STAGE 6

• Opposition parties have called for an emergency parliamentary sitting after the country was plunged into stage 6.
• The DA directly blaming the ANC, Mantashe and Gordhan, while the ANC deflected back to the striking workers.
• Mantashe particularly on the defensive citing “the government has gone as far as it could with Renewable bid windows” being approved.

• STAGE 6 leaves the country at risk of another ratings downgrade, this after a rebound in confidence following the mining boom.
• The BER reported a 30yr low in  SA consumer confidence.
  • The BER (Bureau of economic research) said the index plunged to -25 in Q2-2022.
  • Analysts citing that it would result in a severe slowdown in consumer spending in the remainder of the year.
  • Citing, rising interest rates, higher  fuel costs, power outages and the cost of the pandemic.

GLOBAL MARKETS

Stocks:

• The final day of trading for June, sees stock futures flat in Asian trade, with the S&P 500 heading for its worst first half since 1970.
  • This as markets were pressured by economic and geopolitical factors since the start of this year.
  • Futures contracts tied to the three major index traded flat to slightly negative.
• All three major averages are also on track to post sharp monthly and quarterly losses, with technology stocks hit especially hard.
  • Traders blaming decade high inflation, aggressive rate hikes and risk of recession drove much of the selloff in equity markets in the first half.
  • The WAR in Ukraine also escalating volatility further.
• The FED hiked rates by 75 basis points at its June meeting to bring down rampant inflation, currently running at a 40-year high, with markets pricing in a similar move in July.

Bonds:

• The yield on the US 10-year fell below 3.10% amid concerns over a looming recession and that the Fed will tip the economy into a recession.
• This as it focuses more on inflationary risks.
  • Federal Reserve officials in recent days have reiterated their determination to rein in inflation, setting expectations for a back-to-back 75 basis point rate hike in July.
  • However, economic data continues to paint a bleak picture, including worse-than-expected GDP figures and dire consumer confidence data.
• Adding to woes were the Fed’s preferred inflation gauge, which is printed at more than double of the inflation target.

YESTERDAY

• The Dow added 82 points to 31,029
• The SP500 fell 2.72 to 3,818
• The Nasdaq    declined  3.65 to 11,177

Futures Trading:

• image : Trading economics

OVERNIGHT HEADLINES

• Asian markets lower, with Japan leading the way in losses down -1.42%.
  • The Nikkei 225 fell to 26,560, extending losses from the previous session, with investors factoring in the escalating risk of a global recession.
  • Investors concerned as major central banks aggressively raise interest rates to combat surging inflation.
  • Data also showed Japan’s industrial production dropped 7.2% in May, much lower than market consensus for a 0.3% fall.
  • Analysts suggesting that it could have been affected by lockdowns in China. Technology stocks led the market lower. Bloomberg

• Crude oil Brent steady at $115/bl but were headed for the first monthly decline since November.
  • The fears of an economic slowdown driven by central banks’ aggressive action to combat surging inflation weighed on oil markets this month.
  • Analysts also flagged signs of weakening US gasoline demand, with near-record prices likely suppressing consumption.
  • The oil benchmark is still up about 50% this year as the global economic recovery from the pandemic slump coincided with disrupted Russian supply due to the war in Ukraine.
  • Underinvestment, capacity limits by OPEC+ and political unrest also mired major producers and added to supply concerns.  Energy News

• Gold continued its slide as investors exited the yellow metal due to fears of a Hawkish Fed and more rate hikes.
  • Bullion under performs in this environment despite the decade high levels of inflation .
  • The price edging lower towards $1800/oz currently trading at $1816/oz, despite the ban on Russian Gold by the London Bullion Market Association. Kitco metals

• The US dollar rose and extended gains of the previous session to cross the 105 level and within striking distance of a two-decade high of 105.79 hit on June 15th.
  • Investors rushed to the safe-haven greenback amid downbeat economic data and hawkish remarks from Federal Reserve officials.
  • Chairman Powell, speaking at an ECB annual event, stressed the importance of preventing a high inflation regime, signalling it would go as far as shifting to a restrictive monetary policy. Fx NEWS

Crypto

• Another Crypto hedge fund Three Arrows Capital was plunged into liquidation as market crash takes toll.
• After setting a high of $69,000, BTC plunged to $20,000, a fall of more than 70% off its highs. CNBC

Ukraine-Russia

• In direct defiance to the West, China continues to snap up Russian coal at steep discounts.
• Despite lower demand and higher domestic production, China has bought significantly higher amounts of Russian coal since May.
• “This is because Russia has been offering very steep discounts on prevailing international coal prices” . Reuters

COVID-19 SOURCE https://www.worldometers.info/coronavirus/

Cases / Deaths / Recoveries

WORLD 551,819,640 / 6,356,292 / 527,282,102
USA 89,2366,449 / 1,042,291 / 84,810,554
SA 3,993,444 / 101,764/ 3,879,941