Morning NOTE

GOOD MORNING

The ZAR recovered to open at 16.3000 after weakening to 16.4900 on the back of ESKOM stage 6.

• USDZAR 16.3300
• EURZAR 17.0300
• GBPZAR 19.7700

SOUTH AFRICA   

• Eskom announced stage 6 will continue this week as it says its system remains vulnerable.
  • The country is currently flipping between stages 4 and 6 which will persist until next Sunday midnight.
  • Eskom said it will take a few weeks for its power generation system to fully recover to pre-strike levels.
  • The SOE blaming the recent unprotected strike by some workers for the rolling blackouts.
  • Unions and the utility are still engaged in wage talks. EWN
• South Africans are bracing themselves for another fuel price increase this week.
• Economists have warned that a massive petrol price hike was on the cards.
  • There’s also been speculation that consumers could be paying close to R25 for a litre of 93 octane from Wednesday.
  • The DA said that it believes that the fuel increase will result in a more severe financial and humanitarian crisis in the country.
  • DA MP Kevin Mileham is expected to brief the media on Monday on the party’s fuel price deregulation bill submission to Parliament.
  • It said that the proposal will bring relief to cash-strapped South Africans and get government off the hook as far as the fuel price in concerned. EWN

GLOBAL MARKETS

Stocks:

• Stocks in New York closed higher in the first session of the Q3, as stocks bounced back from earlier losses amid thin trading volumes ahead of a holiday-extended weekend.
  • In regular trading, the Dow was up 322 points, the S&P 500 rose 1.1%, and the NASDAQ booked a 0.9% gain.
• Still, all three indexes posted weekly losses, NASDAQ underperformed with a 4.1% loss, the S&P fell 2.2% and the Dow shed 1.3%.
  • Investors remained concerned after dire consumer morale and worse-than-expected GDP figures.
• Last session, the Dow and the S&P 500 booked their worst 1st half performances since 1962 and 1970, respectively, while the Nasdaq saw its worst-ever half-year run.

Bonds:

• The yield on the US 10-year fell below the 2.9% mark. It was a level not seen in a month, as investors rushed to safe-haven assets.
  • The move on the back of persistent fears that the Fed’s aggressive policies to tame inflation will eventually tip the US economy into a recession.
  • Weak economic data last week fuelled those concerns further, namely signs of a slowdown in consumer spending and worse-than-expected GDP figures.
  • Data indicating that price increases could be slowing but still near multidecade highs.
• In the EU, a deteriorating growth outlook and record inflation prompted a similar rush for government debt.
  • It was reflected in Germany’s 10-year Bund yield tumbling below 1.5% for the first time in four weeks. source : US treasury

ON FRIDAY

• The Dow added 321 to 31,097
• The SP500 added 39 to 3,825
• The Nasdaq  gained 99 to 11,127

Futures Trading:

• image : Trading economics

OVERNIGHT HEADLINES

• Asian stocks followed Wall Street after stocks in New York staged a comeback.
  • In Japan, the Nikkei 225 rose 0.84% to close at 26,154, halting a three-day decline, with utility companies supporting the rebound.
    • Japan continues to deal with an unprecedented heatwave that threatens power shortages.
    • A fire that caused a shutdown in a 500 megawatt unit at Japan’s biggest power generator, JERA, exacerbated concerns over a prolonged electricity crunch.
  • In Australia, the ASX 200 gained 1.1% to close at 6,613, after sliding for three consecutive sessions.
    • Investors buying up beaten-down shares ahead of an expected interest rate hike from the Australian central bank.
    • The Reserve Bank of Australia is expected to deliver another half-point rate increase on Tuesday to tame surging inflation.
      • Aussie inflation accelerated to a 20-year high of 5.1% in the first quarter and projected to approach 7% by the end of 2022.

• Crude oil rose above $109 /bl  erasing losses from earlier in the session, as investors weighed persistent supply-side issues against looming risks of a demand-sapping global recession.
  • Monday’s moves followed a 2.5% rally on Friday driven by supply outages in Libya and expected shutdowns in Norway.
  • Oil prices also remain more than more than 40% up this year as the global economic recovery coincided with disrupted Russian supply due to the war in Ukraine.
  • Adding to supply concerns, OPEC+ has been struggling to pump more crude due to underinvestment, capacity limits and political unrest in some member states.
  • Investors are also tracking China’s slow emergence from virus restrictions amid recurring outbreaks throughout the country.  Energy News

• The US dollar gained above 105, and with the US celebrating independence day, expect thin liquidity conditions.

  • The dollar remains well bid with Fed policymakers confirmed expectations for further policy tightening, indicting another 75 basis point interest rate hike in July.
  • Also, tighter financial conditions across major economies raised fears of a global recession, prompting investors to divest out of riskier assets into the safety of the dollar.
  • Investors now look ahead to the minutes of the last central bank meeting and the monthly jobs report for clues on the likely path for US monetary policy. FX news
• Gold consolidated above $1,810 /oz after hitting a five-month low of $1,784/oz.
  • Bullion however remains under pressure from a strong dollar and a broader decline in commodity prices
  • The dollar hovered near its highest level in two decades as the Federal Reserve led a global wave of aggressive interest rate hikes to combat rising prices.
  • Meanwhile, tighter financial conditions across major economies raised fears of a global recession, prompting a broad decline in commodity prices.
  • The CRB Index reflected such economic fears, and is down more than 10% from its 2022 high. Kitco metal

Ukraine-Russia

• The west continues to find and explore different ways of sanctioning the Russian government and economy because of the WAR with the Ukraine.
  • U.S. President Joe Biden presented the idea of an oil price cap to the rest of the G-7 leaders and his counterparts agreed to look at how to do it.
  • Energy analysts have questioned exactly how the G-7 can impose a price ceiling for Russian oil.
  • Most warning that the plan could backfire if key consumers are not involved, and time may be running out to make it workable.
  • Russia’s Deputy Prime Minister Alexander Novak said Wednesday the idea could push oil prices even higher. CNBC