Morning NOTE

GOOD MORNING

• USDZAR 15.48000
• EURZAR 16.6400
• GBPZAR 19.5300

SOUTH AFRICA   

• The Fuel hike about to hit SA motorists the major topic this morning.
  • Government is still looking at its options as the country faces a petrol price crisis with an increase of around R3.80 a litre taking the price to about R25 a litre.
  • The fuel levy was decreased by R1.50 two months ago, but this was only for a limited period.
  • There have been mounting calls for the fuel levy to be scrapped as South Africans battle to make ends meet.
  • With high fuel prices, comes higher inflation and then higher interest rates.
  • South Africans are waiting to see how government will handle what many are calling the fuel price crisis. EWN
• Eskom announced the suspension of rolling power cuts for now.
  • But warned that an elevated risk of blackouts remains due to the shortage of generation capacity.
  • The power utility on Sunday suspended the rolling power cuts, saying that there had been a marginal improvement in generation capacity.
  • South Africans had been forced to endure power cuts during the evening peak for most of May as Eskom battled to keep the lights on. IOL
• Anti-parasitic drug Ivermectin is no longer allowed to be prescribed to COVID-19 patients.
  • The South African Health Products Regulatory Authority has terminated the controlled Compassionate Use Access Programme with immediate effect.
    • SAHPRA saying there’s no credible evidence it helps treat COVID-19.
  • However, Geneticist and clinical researcher at UKZN professor Colleen Aldous said the anti-parasitic drug was not a miracle cure.
    • But research she’s studied shows Ivermectin is having a positive impact on COVID-19 treatment.

GLOBAL MARKETS

Stocks:

• US stock futures were lower on Tuesday in light holiday volume, while investors are looking to build on last week’s rally.
  • The US stock market was closed on Monday for the Memorial Day holiday.
• The Dow closed 6.2% higher last week, ending an eight-week losing streak.
  • The S&P 500 and Nasdaq also gained 6.5% and 6.8%, respectively, ending positive after seven straight weeks of losses.
  • The consumer discretionary, technology and energy sectors led the advance last week.
    • Notable strong weekly gains from Home Depot (7.4%), Apple (8.8%), Microsoft (8.2%) and Exxon Mobil (6.2%).
• In London, the FTSE 100 is set to open slightly lower on Tuesday, tracking a general cautious mood among its European peers.
  • The spike in oil prices renewed concerns over the need to raise interest rates faster.
  • Fresh data for European economies due during the morning will provide more clues on the need to speed up tightening, specially by the ECB next week.

• US 10’S spike in yields to 2.84% as traders digested PCE data.
  • Core PCE price inflation, Fed’s preferred inflation gauge, fell to 4.9% from a year earlier in April, the lowest in 4 months, pointing out that price increases could be slowing.
  • Earlier in the week, the latest FOMC meeting minutes provided some relief regarding the Fed’s forward guidance.
  • Policymakers agreed that 50 basis point rate hikes would be appropriate as inflation risks are skewed to the upside.
  • This is possible while the economy is robust and the labour market is tight.
  • However, last week’s negative GDP print might have changed this outlook. Source :  Department of Treasury.

• USA markets closed for holiday.

• image : Trading economics

• Asian markets lower, after Wallstreet drifted lower in futures trading following the USA holiday.
  • In Japan, the Nikkei 225 fell 0.33%, as Japanese shares consolidated recent gains, with investors being cautious about the global economic outlook.
    • The benchmark touched its highest in more than a month, after major Chinese cities eased coronavirus curbs and introduced new stimulus measures to support economic recovery.
    • However, analysts warned that ongoing supply chain disruptions and rising commodity prices were making investors cautious.
    • Following the EU ban of 90% of Russian crude by the end of the year.
• The Australian, ASX trading mixed to close at 7,211. Tech stocks trading lower, but mining and commodity stocks rallying following renewed concerns about global supply.
  • The Russian oil ban spooking investors but miners reaping rewards. China’s stimulus plans and exports from Australia, allowed for gains in the sectors.
  • Prices led by Fortescue Metals (1.3%), Rio Tinto (0.6%), South32 (2.5%).  NB: South 32 is a dual listing on the JSE.  Source : TE
• Brent Crude oil prices jumped to $123/bl after EU leaders reached an agreement late Monday to ban 90% of Russian crude by the end of the year.
  • The embargo is part of the European Union’s sixth sanctions package on Russia since it invaded Ukraine.
  • Prices hitting its highest since March 9, after EU leaders reached an agreement to ban 90% of Russian crude by the end of 2022.
    • The move fuelling concerns of an even tighter global oil supply market.
  • The agreement resolves a deadlock with Hungary over the bloc’s toughest sanction yet.
  • This includes cutting Russia’s biggest bank from the SWIFT messaging system. Source : Energy News
• Gold fell toward $1,850/oz after a rebound in the dollar and firmer US Treasury yields.
  • Bullion is also on track to end May more than 2% lower, facing pressure in the first half of the month from expectations of aggressive Federal Reserve interest rate hikes.
  • Gold fell past $1,900 an ounce at the start of May to around $1,786 as the dollar surged to two-decade highs.
  • The yellow metal has since recovered some of its losses.
  • The precious metal found recent support from heightened risks of a global recession.
  • And investor expectations that the US central bank may slow or even pause its tightening cycle later this year. Source : Kitco Metals
• US Dollars recovered to trade at 101.5, but was still set to end the month lower as investors repositioned for the possibility of a slower pace of US interest rate hikes.
  • US consumer spending also rose more than expected in April which shows that the economy remains robust despite price pressures.
  • Investors have scaled back forward expectations about Fed rate hikes amid hints the central bank might slow or even pause its tightening cycle later this year.
  • This after the FOMC increased rates over the previous 2 meetings. Source: FX news
• Cable or the British pound rallied to above $1.2600, reaching to its highest level in 1 month.
  • On optimism that the new Cost of Living Support package will help boost consumer spending.
  • Chancellor Rishi Sunak announced a new £15 billion support package, targeted toward millions of low-income households.
  • It brings the total cost of living support to £37 billion this year.
  • The package includes a new temporary Energy Profits Levy on oil and gas firms.
  • Britons have been struggling with inflation at 40-year highs and the latest data pointed to recession risk, giving less room for the BoE to hike rates more. Source : Poundsterlinglive.

Russia-Ukraine

• The EU secures compromise on Russian oil ban, with Hungary and in turn shuts down 90% of Russian oil imports.
  • In addition, the EU announced Russia’s largest bank would be cut off from the SWIFT system.
• On the War front, the Kremlin claims it now controls a third of key Donbas city, as troops continue their offensive.
• Turkish President Recep Tayyip Erdogan told Russia’s Vladimir Putin he is ready to meet with officials from Russia, Ukraine, and the United Nations.
  • He would be ready to welcome them in Istanbul to help bring about an end to the war, the Turkish government said.
• A French journalist was killed by Russian artillery in the Donbas area, a local official said.
  • Also the UK MOD, said it is likely Russia has suffered “devastating losses” among its officers.
• Fears of a global food crisis mount as Ukraine’s vital grain exports are stuck behind blockaded ports.

• WORLD 532,210,045 / 6,312,017/503,169,391
• USA 85,730,597 / 1,031,286 / 82,151,831
• SA 3,954,971 / 101,162 / 3,808,079

MONKEYPOX UPDATE :

• The WHO said Monday it is too soon to tell whether a recent monkeypox outbreak could lead to a global pandemic.
• The WHO , noted that there is a “window” of opportunity to curb rising cases.
• The public health body said there are “still many unknowns” related to the spike in cases in non-endemic countries.
• It concluded by saying the risks to the general public remain low. CNBC