Morning NOTE

GOOD MORNING

The ZAR weakened to 16.0500 as global markets sold off aggressively across the world.

• USDZAR 16.0500
• EURZAR 16.8800
• GBPZAR 19.8100

SOUTH AFRICA   

• With SA labour markets bracing themselves for strikes, in a world of rising interest rates;
  • It has been reported that South African state workers demand 10% wage increases that includes a R2 500 increase in monthly housing stipends, among other stipulations.
  • In addition, unions representing about 1.3 million state workers demanded 10% pay increases to help them offset soaring electricity, transport and food costs.
    • The unions are also pushing for a single-year pay deal.
  • A spokesperson said they no longer trust the government to honour longer-term accords, after the government reneged on increases agreed to in 2020.
    • The government at the time citing, on the grounds that it was unaffordable. Moneyweb
• Public Enterprises Minister Pravin Gordhan told Parliament that not all ANC members are thugs and that President Ramaphosa’s administration is working hard to resolve Eskom’s challenges.
  • During the debate, the ANC was described as “a mafia” dressed in black, green and gold but Gordhan hit back.
  • He told the house there were many honest, dedicated and patriotic ANC members who wanted the state to work for the people and to put the corrupt in jail.
  • Gordhan acknowledged there was no quick fix but denied that Eskom was broken and detailed efforts by Ramaphosa’s administration to turn the power utility around. EWN
• Analysts warning that Transnet could become the ESKOM.
  • Speaking at the McCloskey Southern African Coal Conference on Thursday, a report cited that Transnet is in “free fall” and it is throttling investment and will ultimately cause mines to close.
  • Coal producers impacted by Transnet’s poor railing performance complained about the state of the coal line to the Richards Bay Coal Terminal (RBCT).
  • This at a time when demand for South African coal has jumped, and export coal prices are rocketing. IOL

Stocks:

• In trading on Thursday, the Dow lost more than 1,000 points and the tech-heavy Nasdaq Composite plunged nearly 5%, with both indexes notching their worst one-day drops since 2020.
  • The S&P 500 also dropped 3.56% for its second-worst day of the year.
  • Thursday’s rout erased Wednesday’s huge post-Federal Reserve meeting rally when Fed Chair Jerome Powell ruled out the prospect of larger rate hikes.
  • US stock futures were little changed on Friday after a technology-led selloff on Wall Street.
  • Treasury yields signalled continued expectations for larger rate hikes to bring decades-high inflation under control, even at the risk of some economic pain.
• Investors now await the April jobs report due later today. (NFP +400k)

• The yield on the 10-year US treasury, jumped to 3.08%, a level not seen since November 2018.
  • The bond market rout as investors digest the narrative of a looming policy tightening cycle against a backdrop of slowing global growth.
  • The US FED hiked its benchmark policy rate by half a percentage point for the first time since 2000 and also sending a strong signal that it intended to do so again at the next two meetings.
  • With 40-year high inflation and a tight  job market, the Federal Reserve had no choice but to change the narrative and signal a faster tightening. source: U.S. Department of the Treasury

• The Dow declined 1,063 to 32,997 or -3.12%
• The SP500 declined 153 to 4,416 or -3.56%
• The Nasdaq declined  647 to 12,317 or -4.99%
• image source: Trading Economics

• Asian markets followed Wallstreet lower following the large sell-off on the back of rising yields.
  • In Japan, the Nikkei 225 Index fell 0.3% to 26,738 after returning from a 3-day holiday.
    • Traders taking cues from sharp moves on Wall Street as surging inflation, a challenging growth outlook and policy tightening continued to grip markets.
  • In Australia, the ASX 200 fell 2% to 7,215, hitting its lowest in more than a month.
    • The market lower after Wall Street plunged overnight on fears that relatively milder US interest rate hikes could risk further inflation, while global growth concerns persist.
    • Australian technology stocks tracked their US peers lower, as all other sectors participated in the selloff, with heavy losses from financial, healthcare and clean energy-related names.
• Crude oil traded higher to reach $109/bl and was on course for its second straight weekly advance.
  • Prices advancing as concerns about tight global supply and an impending EU embargo on Russian oil outweighed uncertainties about global economic growth.
  • Oil prices are up about 4% so far this week, buoyed by the EU’s proposal to phase out supplies of Russian crude in six months and refined products by the end of 2022.
    • Investors worried that aggressive central bank policies around the world aimed at bringing down inflation could dampen growth.
    • Elsewhere, a US Senate panel advanced a bill that could expose OPEC+ to lawsuits for collusion on boosting oil prices amid growing pressure from rising inflation and high gasoline prices. Energy News
• Gold traded above $1,880/oz but was set for its 3^rd week of losses.
  • Traders citing, the soaring US Dollar and rising Treasury yields as investors continued to bet on further Central bank tightening to bring decades-high inflation under control, even at the risk of some economic pain.
  • The yellow metal is down more than 1% so far this week as the dollar held near its highest in 20 years against a basket of major currencies, while the benchmark US 10-year yield rose firmly back above 3%. Kitco Metals
• The US Dollar traded above 103.5 on Friday and was set for its 5th consecutive week of gains.
  • Traders bet on further US FED monetary tightening to bring decades-high inflation under control.
  • The greenback is up about half a percent so far this week, hovering near its highest in 20 years and tracking gains in Treasury yields, with the benchmark US 10-year yield topping 3.1% overnight.
  • The Fed on Wednesday raised its benchmark overnight interest rate by 50 basis points, the biggest jump in 22 years;
    • However, Powell added the bank was not considering a 75 basis-point move in the future.
  • However, he assured Americans that the central bank will do what it takes to curb surging inflation, while acknowledging that this could risk economic pain. Forex news (Poundsterlinglive)
• Investors now await the April jobs report due later today which could reinforce the case for aggressive monetary policy tightening.

Central banks  and inflation  (source : Reuters)

• In a race to get on top of surging inflation, central banks in the United States, Britain and Australia, all hiked up interest rates this week.
  • High inflation also prompted Iceland to lift rates by one percentage point on Wednesday, and India delivered an unscheduled rate rise.
  • Some, such as the Bank of England, worry their economies are headed for recession, but that has not stopped them from signalling more hikes are coming.
• Even, the dovish European Central Bank has become more hawkish given record-high inflation at 7.5%.
• ECB board member Isabel Schnabel said this week rates may need to rise as soon as July.
• A precursor to any rate hike must be the end of bond purchases, and this could come at the end of June, she added.  Reuters

RUSSIA / UKRAINE

• The USA pushed back on a story that cited the USA provided  “specific targeting information” to Ukraine to sink the Russian warship.
• In joint statement, India and France said it looked to play a “constructive role” in Ukraine-Russia conflict.
  • Up to now India has continued to purchase Russian crude at discounted prices as it ignores international sanctions.

• WORLD  515,911,408 / 6,272,198 / 470,752,577
• USA 83,437,158 / 1,023,908 / 80,872,122
• SA 3,818,125 / 100,471 / 3,668,982