Morning NOTE

GOOD MORNING

The ZAR traded weaker to reach 16.8600, before consolidating around the 16.7300 level ahead of today’s NFP report.

• USDZAR 16.7200
• EURZAR 17.0000
• GBPZAR 20.1400

SOUTH AFRICA   

• SA’s new vehicle market has made an astonishingly rapid recovery from the negative impact of the Covid-19 pandemic.
  • Sales in the first six months of 2022 are only 1.6%, or 4 182 units, lower than the sales registered in the corresponding pre-Covid period in 2019.
  • However, economists and analysts attribute this strong “bounce back” largely to the pent-up demand that developed during the Covid-19 lockdowns. Source : Money Web
• The City of Tshwane paid R876.29 million in Eskom debt on Thursday after “reprioritising” its funds.
  • Tshwane spokesperson said the City had reprioritised its funds after engaging other creditors to shift and stagger other payments due.
  • Eskom on Thursday confirmed it had received proof of payment, although there was a shortfall of R1.7 million.
  • Bokaba said the R1.7 million did not pertain to electricity consumption, but interest levied, and would be paid from a separate account. NEWS 24
• Public Enterprises Minister Pravin Gordhan had to be whisked away by security guards after an event he was addressing on Thursday evening descended into chaos.
  • Gordhan’s speech dealt with what he said was an emerging force that wanted to return the country back to corruption and a new form of state capture.
    • The group called Gordhan a “sell-out”, and made several comments about his race”.
  • Gordhan was talking about the future of state-owned entities (SOEs) at the Wits School of Governance.
    • But as proceedings began, a group, from the Congress of SA Students, heckled the minister. IOL new

GLOBAL MARKETS

Stocks:

• In regular trading on Thursday, the S&P 500 and Nasdaq posted their 4th straight day of gains, rallying 1.5% and 2.3%, respectively.
  • The Dow also gained 1.1% for its third winning session in four.
• However, this morning, stock futures all lower in Asian trade, ahead of the highly anticipated monthly jobs report due Friday.
• Energy stocks led the advance as oil prices rebounded, with gains from Exxon Mobil (3.2%), Chevron (2%) and Occidental Petroleum (4%).
  • Chipmakers also boosted the technology sector after Samsung posted its best April-June quarterly profit in three years.
• Investors now look ahead to a key jobs report which is expected to show another month of strong hiring, bolstering the case for another supersized rate increase from the Federal Reserve.

Bonds:

• The yield on the 10-year note went up to 3% on Thursday, rising for the 2nd straight session, as investors weighed the Fed’s resolve in bringing down inflation.
  • Governor Waller said on Thursday he’ll be supporting a 75 bps rate hike later this month, and most likely a 50 bps hike in September, before starting the debate around 25 bps increases.
  • At the same time, St. Louis Fed’s Bullard reiterated calls to get the funds rate at 3.5% later this year, which would leave room for two 50 bps rate hikes after the July meeting.
  • Lastly, the FOMC June meeting minutes consolidated bets for another 75 bps rate hike as Fed is set to continue an aggressive monetary policy stance to curb inflation.
• Britain’s 10-year Gilt rose slightly to above 2.1%, having hit a 5-week low below 2% earlier in the week.
  • The move after Boris Johnson announced the end of his term as Britain’s Prime Minister.
  • Apart from the political turmoil, investors worry about a looming recession as sky-high inflation hurts household consumption.
  • The BoE warned the UK’s economic outlook has deteriorated markedly due to the impact of the war in Ukraine and told banks to ramp up capital buffers to deal with shocks.

YESTERDAY

• The Dow  added 346 points to 31,384
• The SP500 added 57 to 3,902
• The Nasdaq  gained 259 to 11,621

Futures Trading:

• image : Trading economics

OVERNIGHT HEADLINES

• Asian markets tracked Wall street higher, with a strong showing across the region.

  • In Japan, the Nikkei 225 jumped 1.3% to above 26,800, extending gains in the previous session and tracking an overnight rally on Wall Street.
    • Resource-related stocks led the advance.
    • This opening the likelihood for another supersized rate hike from the Federal Reserve.
    • Investors are also bracing for the US jobs report which is expected to show another month of strong hiring in June
  • In Australia, the ASX 200 gained 0.45% to close at 6,678 on Friday, also lifted by resource-related stocks amid a recent rebound in commodity prices.
    • Australian shares also tracked overnight gains on Wall Street as investors navigated volatile markets marred by fears of a potential recession.
    • Energy stocks led the charge as oil prices jumped overnight, with notable gains from Woodside Energy (1.7%).
• Crude oil remained at $102/bl but is set to finish the week lower due to concerns of a global recession that is expected to hurt energy demand.
  • The demand worries for now out stripping supply-side issues.
  • The US oil benchmark is down more than 5% so far this week, tracking a broader decline in commodity markets.
  • Traders blaming restrictive monetary policy among major economies threatened an economic downturn.  Energy news
• Gold consolidated around $1,740 /oz, but was headed for its fourth straight weekly decline.
  • The  heightened recession fears and an increasingly restrictive US monetary policy drove investors out of bullion and into the dollar.
  • In the latest Federal Reserve commentary, two of the most hawkish policymakers, Waller and Bullard, backed raising interest rates by another 75 basis points this month to curb red-hot inflation.
  • The Fed’s aggressive stance against inflation raised fears of a slowdown in the world’s largest economy, prompting a decline in commodity prices.
  • The European Central Bank is also set to start raising borrowing costs this month and is expected to accelerate its policy tightening for the rest of the third quarter if inflation remains high. Kitco metals
• The US dollar held firmly above 107 on Friday, inching closer to a fresh 20-year high, as investors await US jobs data which is expected to remain solid in June.
  • An aggressive stance against inflation among major economies also stoked fears of a global economic slowdown, prompting investors to rush for the safe-haven dollar.
  • The greenback gained markedly against the euro as looming gas shortages in Europe threatens to derail the region’s economic growth.
  • The dollar index is up almost 2% so far this week and is headed for its second straight weekly gain.
• The Euro remained under pressure, trading near 20 year lows. It is on the verge of hitting dollar parity on growing concerns Russia may cut off gas supply to Europe and plunge the region into recession.
  • This in turn would make it more difficult for the ECB to tighten monetary policy.
  • The key pipeline Nord Stream 1 is set to shut for maintenance on July 11-21 and may not return to full capacity, threatening the bloc’s objectives to fill up storage capacity before winter.