The ZAR traded in a wide range (16.6700- 16.7700), following Hawkish Fed statements coupled with poor EU data (Risk-off) and strong US corporate earnings (Risk-on).
- The Rand traded in a wide range, after losing ground in early trading due to Hawkish Fed officials and poor EU data, resulting in early session selling.
- This all turned around when risk appetite returned, later in the New York session, following stronger than expected corporate earnings and a surprise bump in July PMI.
- Yields also consolidated around the 2.7% level on treasuries as investors await tomorrow’s US jobs report.
- Payrolls expected to gain +250k although lower than previous +372k .
Price action continues to suggest that the market remains nervous ahead of future data releases as well as Fed commentary. The market pricing in 50 bps hikes, but officials continue to talk up 75 bps, if inflationary conditions remain.
- This likely to keep the dollar supported with better than expected data out of the USA.
- It highlights the RISK THAT NON-FARM PAYROLLS HOLD FOR MARKETS.
- On the flip side (the case for lower rates)
- Data shows a slowdown in economic growth and likely a Fed pivot.
- Demand for now outweighing Supply issues and this reflect in a broad based sell-off in the Commodity complex.
- Copper prices falling more than 3% this week, as well as another hard drop in Oil prices . Crude down 4% .
- With energy being the largest component of the CPI basket, we remain of the opinion that inflation has peaked.
Significant data this week;
- 13h00 : Bank of England Rate decision + 50 bps expected.
- UK yields higher as markets now pricing in 50 bps and not the 25 bps expected earlier in the week
- The UK 10Yr gilt yield spiking to 1.93% .
- Friday :
- 14h30 : US NON-FARM PAYROLLS +250K expected vs 372k previous
- 14h30 : US UNEMPLOYMENT RATE 3.6% expected vs 3.6% previous
- The ZAR weakened sharply on the back of Fed comments trading to a weakest level of 16.9100.
- The local unit thereafter gaining more than 20 cents following a rebound on Wallstreet as investors flocked back into risk assets.
- The session ahead, remains a volatile one, ahead of UK BOE rates as well as US jobs report tomorrow.
- The theme remains : HAWKISH FED COMMENTS & ACTIONS.
- After the strong rally in late New York, expect some early ZAR weakness as importers take advantage of “ better” levels.
- Stock futures also lower in Asia, likely to place the ZAR under pressure early on before a rebound is expected.
- Exporters : levels between 16.8000 – 16.9100 are good levels .
- Importers can hold off until after NFP.
- USDZAR : Expect a range 16.6600-16.8800
- Importers 16.7000-16.6600
- Exporters 16.8200-16.8800
- EURZAR : Expect a range of 16.8600-17.1100
- Importers 16.9600-16.8600
- Exporters 17.0500-17.1100
- GBPZAR : Expect a range of 20.1700-20.4400
- Importers 20.2800-20.1700
- Exporters 20.3800-20.4400
- USDZAR 16.7400
- EURZAR 17.0200
- GBPZAR 20.3300
- Eskom on Wednesday that said persistent shortages in generation capacity at its several power plants has led to the return of ramped-up load shedding.
- The utility announced stage four rolling power cuts will be implemented from 4 pm on Thursday and will last until midnight.
- Eskom spokesperson Sikonathi Mantshantsha said that the power cuts were also likely to be implemented again on Friday.
- Adding that stage two load shedding will be implemented between 5 am until midnight on Friday.” EWN
- One South Africa leader Mmusi Maimane said that he was recovering from a traumatic experience after being robbed at a bar on Wednesday night.
- The politician was among several patrons who came face-to-face with three gunmen who stormed a Cape Town bar. News24
- Global consultancy Bain & Company has been banned from UK government contracts for three years over the role it played in facilitating the capture of the South African Revenue Service (SARS).
- Lord Peter Hain, a former UK Cabinet minister with links to South Africa, recently claimed Bain was employing staff in its London office who “colluded” with former president Jacob Zuma, and asked that the government to ban it.
- He added, “Global corporates like them have to feel the pain for the consequences of their corrupt and unlawful behaviour in South Africa’s state capture and corruption scandal under former President Zuma.
- Otherwise other corporates will be tempted to do the same.” Source : NEWS 24
- In regular NYSE trading on Wednesday, the Dow rose 1.3%, the S&P 500 gained 1.6% and the tech-heavy Nasdaq advanced 2.6%.
- Robust corporate earnings supported the recent market rally.
- Also the market welcomed a surprise rebound in July services PMI helped ease concerns about a potential recession.
- Investors now look ahead to weekly jobless claims, further Fed commentary and more earnings reports.
- US stock futures inched lower in Asian trade as futures contracts tied to the three major indexes traded flat to slightly negative.
- The major EV maker has slashed its full-year production target by more than a third now and reported a quarterly loss of 33 cents per share.
- In after-hours trading, Lucid Group tumbled nearly 13% .
- The 10-year US yield consolidated above 2.7% bouncing off a four-month low of around 2.5% as investors reassessed the outlook of tightening monetary policy.
- Several Fed policymakers, including the Chicago Fed president Charles Evans, which tends to be very dovish, indicated a strong commitment to bringing down inflation.
- He pointed to a 50 bps hike in September but opening the door for a 75 bps increase if necessary.
- In addition, This highlighted by St. Louis Fed Bank President James Bullard, who said he favours a strategy of front-loading big rate increases.
- He also repeated that he wants to end the year at 3.75% to 4%, as reported by Bloomberg.
- The Dow gained 416 points to 32,812
- The SP500 added 43 points to 4,155
- The Nasdaq added 319 points to 12,668
- image : Trading economics
- Asian Markets mixed following a topsy turvy session in New York. Wallstreet recovering with a late rally bolstered by strong corporate earnings.
- In Japan, the Nikkei 225 Index climbed 0.69% to close at 27,932, rising for the second straight session.
- The index lifted by a weaker yen and upbeat domestic corporate earnings.
- Japanese shares also tracked a strong rally on Wall Street as robust earnings reports and a better-than-expected July services PMI reading in the US eased concerns about a potential recession.
- In Australia, the ASX 200 Index fell 0.01% to close at 6,975, reversing gains from earlier in the session, as losses in the resources sector countered gains in technology and banking stocks.
- Australian shares lagged behind their Asia Pacific peers on weaker commodity prices amid renewed fears that rising interest rates would hamper global growth and dent overall demand.
- Losses among mining and energy stocks were led by BHP Group (-1.1%), Rio Tinto (-1.6%), Fortescue Metals (-2%), Woodside Energy (-3.1%) and Santos Ltd (-1.3%).
- Meanwhile, domestic technology stocks tracked their US peers higher, with gains from Block Inc (8.9%).
- Financial stocks also rebounded from Wednesday’s slump, with the “Big Four” banks rising between 0.3% to 1.3%. Bloomberg
- Crude oil declined to trade at $90/bl. (DEMAND WORRIES)
- The US benchmark falling 4% in the previous session, as traders weighed a modest supply increase from OPEC+ against rising US crude inventories and signs of declining US gasoline demand.
- The group of major producers agreed to raise oil output by a non-material 100,000 barrels a day in September and warned of “severely limited” spare capacity.
- It was a major setback to US President Joe Biden’s attempts to convince Arab leaders to pump more crude.
- Meanwhile, official data from the EIA showed that US crude stockpiles expanded by about 4.5 million barrels last week despite expectations for a 629,000 barrel decline.
- The same report also indicated that Americans are now driving less than they did in the summer of 2020.
- This despite pandemic restrictions during that period, with surging inflation continuing to weigh on demand. Source : Bloomberg.
- Gold flatlined around $1,770/oz on Thursday, holding close to its highest levels in a month.
- Traders waiting for the monthly US jobs report that could provide more cues on the Federal Reserve’s tightening path.
- Gold prices have been climbing in the past two weeks amid speculations that the FED may raise interest rates less aggressively in the coming months to avoid a recession.
- However, several Fed officials recently pushed back against such expectations, signalling a strong intent to keep hiking rates until inflation abates.
- In addition, Geo-political tensions between the US and China, after House Speaker Nancy Pelosi visited Taiwan are keeping markets on edge.
- This makes Bullion a viable option for safety should the situation escalate. Source : Kitco metals
- The US dollar index held steady above 106 on Thursday after recovering from one-month lows earlier this week.
- Traders are waiting for a key monthly jobs report that could guide the outlook for US monetary policy.
- The US non-farm payrolls number for July due on Friday is expected to come in at 250,000, and a surprise on either side could impact expectations on the Federal Reserve’s next policy move.
- The Dollar started to weaken in mid-July amid speculations that the US central bank may raise interest rates less aggressively in the coming months to avoid a recession.
- However, the greenback recouped some losses after several Fed officials recently pushed back against such expectations.
- This highlighted by St. Louis Fed Bank President James Bullard, who said he favours a strategy of front-loading big rate increases.
- He also repeated that he wants to end the year at 3.75% to 4%, as reported by Bloomberg.