Morning NOTE

GOOD MORNING

The ZAR weakened aggressively on Friday after the US jobs report surprised the market to the upside with +528k new jobs vs 250k expected.

• USDZAR 16.7500
• EURZAR 17.0700
• GBPZAR 20.2500

SOUTH AFRICA   

• Parliament will initiate a process that could lead to an impeachment inquiry against President Cyril Ramaphosa.
  • This follows repeated attempts by the African Transformation Movement,  to get Speaker Nosiviwe Mapisa-Nqakula, to agree to its motion.
  • The motion is for  Ramaphosa to face Parliament over the Phala Phala farm saga.
  • Political parties will have to nominate eminent South Africans to consider evidence to justify an impeachment inquiry. News24

• WATER CRISES?

  • The City of Cape Town is urging residents to use water sparingly.
    • The CoCT said that its dam levels were currently sitting at 75% as a result of lower than predicted rainfall in July.
    • The Mayco member for water and sanitation, said that they were hoping that August would bring much-needed rainfall.
      • “August is very important for us to watch in terms of the predictions that have been made.
    • At this moment, our anticipation is that by the end of the hydrological year, our dams would have been filled to about 90%.”
      • The city faced one of its worst ever droughts between 2015 and 2017. EWN
  • The  Amathole district municipality is the latest to be grappling with a water crisis.
    • Financial disputes are believed to be behind the struggles of the Eastern Cape-based municipality.
    • Allegations of cadre deployment and a lack of skilled leadership at the Amathole municipality are said to be the reasons behind its problems.
    • The Democratic Alliance (DA) in the province said that the suspension of several officials meant that there were no leaders to hold accountable. EWN
• The local travel industry was one of the hardest hit, due to COVID-19 lockdowns around the world.
  • But experts said that with restrictions lifted in most countries and more people going on holiday, things were finally starting to turn around.
    • Over R2.5 trillion – that’s how much money airlines across the globe lost due to the turbulence of COVID-19.
  • Dubai tourism is making a concerted effort as the ministry for tourism announced.
    • Announcing Dubai Tourism will be coming to South Africa to visit Cape Town, Johannesburg and Durban.” IOL

Stocks:

• Global stock futures higher Monday as investors digested a surprisingly strong monthly jobs report released late last week.
• Traders turned their focus to a key inflation report this week for more clues on the Federal Reserve’s next policy move.
• Investors confident the world’s largest economy can withstand FED rate hikes after Friday’s payrolls report.
  • The major averages ended mixed in regular trading on Friday, with the Dow rising 0.23%, while the S&P 500 and Nasdaq Composite lost 0.16% and 0.50%, respectively.

• The US 10YT yield traded 2.82% after a strong jobs reported confirmed, the Fed will likely hike 75 basis points at the next meeting.
  • The US economy added 528K payrolls in July 2022, well above Wall Street expectations.
  • The data followed hawkish comments from several Fed officials, which made a policy pivot even more elusive as the central bank sought to cool an overheating economy.
• Investors now await the July CPI data slated for release on Wednesday.

• The Dow added 76 points to 32,803
• The SP500  fell 6 points to 4,145
• The Nasdaq   declined 63 to 12,657

• image : Trading economics

• Asian markets trading higher across the region after Friday’s strong jobs report as well as investor optimism around better than expected corporate earnings.
  • In Japan, the Nikkei 225 Index rose 0.2% to 28,240, extending gains from last week.
    • The move supported by upbeat domestic corporate earnings and a strong outlook.
    • However, investors remained cautious following a surprisingly strong US jobs report.
    • Traders worried that the report supports the Federal Reserve’s firm hawkish stance, ahead of the release of US inflation data this week.
  • In Australia, the ASX 200 Index closed up by 0.07% to 7,021.
    • It was the highest level in almost two months, as gains in commodity-linked stocks outweighed losses in other major sectors.
    • Leading the index higher, was OZ Minerals gaining more than 35% after it rejected a A$8.34 billion takeover bid from BHP Group which it considered undervalued. Reuters
• Crude oil WTI futures recovered  above $89/bl after last week’s 10% collapse.
  • Traders citing US jobs and Chinese exports data eased concerns about a demand-sapping global recession.
  • A stronger-than-expected US jobs report allayed fears of an economic slowdown in the world’s top oil consumer,
    • while solid export growth data in China raised hopes for an economic rebound in the country.
  • Demand worries caused the  US oil benchmark to fall  almost 10% last week.
    • Prices collapsing to their lowest levels in six months as data pointed to growing US crude inventories and declining US gasoline demand. Energy News
• Gold declined to  $1,770,  after falling from one-month highs in the previous session.
  • The rise in US yields, after a surprisingly strong US jobs report supported expectations that the Federal Reserve will continue to tighten aggressively.
  • Analysts are now betting that the Fed will deliver another 75 basis point rate hike in September.
  • Investors are also preparing for US inflation data due on Wednesday that could offer more clues on the central bank’s rate hike path. Kitco metals
• The US dollar rebounded above 106.5, after gaining nearly 1% in the previous session.
  • The Greenback supported by a surprisingly strong jobs report last week that reinforced that Federal Reserve’s case for further monetary tightening.
    • The US economy unexpectedly added 528,000 jobs in July, more than double the 250,000 jobs economists predicted.
    • It also eased recession fears as the jobs market remained solid even in the face of high inflation and rising interest rates.
  • Markets are betting that the Fed will deliver another 75 basis point rate hike in September.
  • In addition, Fed Governor Michelle Bowman said, she supports the central bank’s 3 quarter point rate hikes and believes they should continue until inflation is subdued.
    • Investors now turn their focus to the US CPI report due on Wednesday that could offer more clues on the Fed’s rate hike path. FX news

• INFLATION and EM REVIVAL

  • Emerging markets hiked interest rates ‘way before’ the Fed, says major asset management firm.
  • Rajeev De Mello of GAMA Asset Management says emerging markets “will benefit once we get past this period of frontloading the Fed hikes.”
  • He added, if the U.S. Federal Reserve tightens monetary policy even more than what has been priced in, there could be further stress on those markets. CNBC