Morning NOTE

GOOD MORNING

The ZAR recovered on the back of positive Risk Asset sentiment after a strong performance on Wall Street.

• USDZAR 16.6300
• EURZAR 17.0100
• GBPZAR 20.1800

SOUTH AFRICA   

• With many union leaders saying there is no appetite for a strike in the public service given the losses workers would incur amid the cost of living crisis.
  • Cosatu’s public sector unions met with Acting Public Service and Administration Minister on Thursday night to try and prevent a looming stalemate over wage increases.
  • On Friday morning, unions will officially table workers’ rejection of a 2% wage hike offer by government.
    • Instead, they want at least 4% and would settle at the 3%, which was the rate of salary adjustments for public office bearers, including ministers earlier this year. EWN
• Eskom announced increased levels of load shedding after news reports that KOEBERG UNIT 2’s startup was delayed again.
  • On the back of the government’s move towards renewables, given the current energy crises, it has emerged that US investors are looking for investment opportunities in SA.
    • US investors with more than $1 trillion (nearly R17 trillion) of assets under management are in South Africa to look for investment opportunities.
  • The visit being facilitated by USAID and Prosper Africa, the US government’s initiative to increase trade and investment between African nations and America.
  • It will coincide with US Secretary of State Antony Blinken’s trip, who arrives in SA on Sunday. NEWS24
• Minister of Home Affairs Aaron Motsoaledi included 41 specialised healthcare professional codes to the critical skills list.
  • This will see a range of healthcare professionals outside the country prioritised in South Africa’s expatriate migration system.
  • Six categories of specialist nurses were included in the latest critical skills list, including trauma, paediatric, and midwifery nurses.
  •  The move is widely seen as a proactive response to the shortage of healthcare specialists in the South African job market.
  • A shortage of nurses in the healthcare sector has even affected private hospitals.

Stocks:

• In regular trading on Thursday, the Dow and S&P 500 shed 0.26% and 0.08%, respectively, while the tech-heavy Nasdaq rose 0.41%.
  • The S&P 500 and Nasdaq Composite are on track to post a third straight week of gains, while the Dow is set to snap a two-week advance.
• This morning in light Asian trading, US stock futures were little changed, as investors looked ahead to the highly anticipated jobs report.
  • It could give fresh insight on the state of the economy and further clues on the Fed rate path.
    • Futures contracts tied to the three major index drifted flat to slightly positive.
• The jobs report :
  • The US non-farm payrolls number for July due Friday is expected to come in at 250,000, and any surprise on either side could impact expectations on the Fed’s next policy move.

• The 10-year US yield retreated to the 2.7% level, closing in on its lowest level since April.
  • Hawkish comments from Federal Reserve policymakers shifted investors’ focus to further monetary tightening.
  • The central bank has reassured markets that it remains fully committed to taming inflation (CPI currently at 40 year high’s).
    • The Fed’s campaign to do whatever it takes to bring down inflation to the 2% target brought the gap between 2-year and 10-year Treasury yields to an extreme of almost 40 bps.
  • The gap hasn’t been seen since 2000.

• The Dow declined 85 points to 32,726
• The SP500 fell 3.23 points to 4,151
• The Nasdaq  gained 52 to 12,720

• image : Trading economics

• Asian markets well bid across the region ahead of today’s non farm payrolls.
  • In Japan, the Nikkei 225 rose 0.87% to close at a 2-month high of 28,176, with both benchmarks finishing the week modestly higher.
    • Traders navigated another volatile week marked by :
      • solid corporate earnings,
      • mixed global economic data,
        • hawkish Federal Reserve commentary
      • and heightened US-China tensions.
    • Meanwhile, investors remained cautious following reports that Chinese missiles landed in Japan’s exclusive economic zone.
• Crude Oil declined below $90/bl to hit $88/bl as demand concerns continue to weigh on prices.
  • Prices are down 10% this week, hitting the lowest levels in six months on growing concerns that a global economic slowdown has precipitated a demand destruction.
  • Official data showed that US crude inventories expanded significantly last week despite expectations for a decline.
    • In addition, US gasoline demand dropped well below pre-Covid seasonal norms.
  • This week’s slump also came even after Saudi Arabia raised oil prices for Asian buyers to a record.
    • …. and despite OPEC’s decision to raise oil output scantily for September and warning of “severely limited” spare capacity.
• Gold rallied to $1,790/oz Friday, hovering at its highest levels in a month.
  • Bullion is up about 1.4% so far this week and is on track for a third consecutive weekly rise.
  • The Bank of England delivered its biggest rate hike in 27 years and warned that the UK is set to enter recession in the fourth quarter.
    • Investors are also bracing for a key US jobs report that could provide clues on the Federal Reserve’s tightening path .
  • Meanwhile, markets continued to monitor escalating geopolitical tensions in the Asian region, with China reportedly firing a barrage of ballistic missiles into the waters around Taiwan.
• The US DOLLAR Declined further on the back of lower treasury yields.
  • The Dollar below 106 at 105.86 after facing increased volatility earlier this week.
  • Traders are preparing for today’s key 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.