View this email in your browser

Morning NOTE

9 May 2022


The ZAR weakened on the back of a fall in global sentiment to reach 16.1500.


  • The Rand weakened after Non-farm payrolls surprised to the upside and supporting a more hawkish Fed due to a well-supported labour market.
    • NFP printing at 428k vs 390k expected.
  • Risk assets all declined sharply on Friday and in early Asian trading, after the global yields spiked sharply on Friday in anticipation of global interest rate rises.
    • Markets however have expectations of  more aggressive tightening as inflation continues to run at 40yr highs.
    • Even though Fed chair Powell pushed back against bets of 75 bps rate hikes in the future.
    • The US 10YT rising to 3.15%, the highest since November 2018.
  • This week on the data front we have the following market moving information;
    • Wednesday :
      • 14h30  : US inflation expected 8.1% vs 8.5% previous.
      • 14h30 : US Core inflation expected 6% vs 6.5% previous
    • Thursday :
      • 11h30 : SA mining production  +3% expected vs -6 % previous (YOY)
      • 11h30: Gold production +8.5% expected vs -9.3% previous (YOY)
  • Today:

    • Traders continue to watch the Risk trade with global yields all spiking following Friday’s NFP.
    • Some early profit taking by short term exporters likely to support he ZAR, before the weakening trend resumes.
  • USDZAR :  Expect a range 15.9600-16.3800
    • Importers 16.0500-15.9600
    • Exporters 16.2000-16.3800
  • EURZAR :  Expect a range of 16.8200-17.0300
    • Importers 16.9200-16.8200
    • Exporters 16.9900-17.0300
  • GBPZAR :  Expect a range of 19.6400-20.0200
    • Importers 19.7100-19.6400
    • Exporters 19.9000-20.0200
  • USDZAR 16.1300
  • EURZAR 16.9600
  • GBPZAR 19.8100


  • The ongoing Gold miners strike at Sibanye Gold is finally being reported in its financials.
    • Sibanye-Stillwater lost R4bn in gold sales in three months.
    • The latest quarterly report from Sibanye-Stillwater indicates that the group’s gold operations in South Africa suffered huge losses in its first quarter to end March 2022.
    • Gold production plummeted 47% to 4 264kg in the March quarter compared to 8 097kg the previous quarter. Moneyweb
  • According to reports, Eskom is burning more diesel than ever to keep the lights on.
    • During the evening peak last week, it was reported that the SOE used its diesel-burning open cycle gas turbines (OCGTs) for all but one of the 24 hours that made up the time of day where demand is greatest.
    • Public data from the utility shows that Eskom made use of its OCGT’s every day between Tuesday and Friday.
    • Even though, Monday was a public holiday, yet it still used these turbines between 5pm and 9pm. Reuters
  • SA’s petroleum product imports are expected to as much as three times by next year.
    • Exceeding pre-pandemic levels as domestic refineries close, according to energy consultant Citac.
    • SA currently imports 60% of its oil requirement any increase in shipments will require improvements to existing storage facilities, ports and pipelines, Citac said in a report.
    • With the Russian crises creating supply disruptions and Eskom extraordinary use of diesel, consumers are bracing themselves for even high fuel prices. EWN


  • Wallstreet ended sharply lower following the better than expected NFP data. The data supporting Fed hawkishness.
  • In early trading on Monday, US stock futures fell, as investors look ahead to fresh inflation data to gain insight on the Federal Reserve’s possible next steps.
  • The market action followed dramatic moves on Wall Street.
  • The  markets reversed course late last week as the risk of persistent inflation and a challenging growth outlook weighed on investor sentiment.
  • The yield on the 10-year US Treasury note, rose to above 3.10%, a level not seen since November 2018, as the Fed’s tightening cycle went into full swing after the FOMC hiked rates by 50 bps.
    • The recent jobs report showed the US economy added 428K jobs in April, and more than market forecasts.
    • The data reinforcing a more hawkish Fed stance.
    • On Wednesday, Chairman Powell pushed back against more aggressive bets of 75 bps rate hikes in the future.
    • However, with inflation running at four-decade highs and a resilient economy, expectations of a more aggressive tightening remain. source: U.S. Department of the Treasury
  • The Dow  fell 98 points to 32,899
  • The SP500 declined 23 to 4,123
  • The Nasdaq declined 173 to 12,144
  • image source: Trading Economics
  • Asian markets all followed Wallstreet lower following the bond market sell-off and rise in global interest rates.
    • In Japan, the Nikkei 225 fell 2.3% to around 26,380, reversing gains in the previous session and taking cues from an early slide in US equity futures.
      • Traders concerned about  tighter monetary policy globally against the backdrop of high inflation and a challenging growth outlook.
      • In addition, Prime Minister Fumio Kishida said Japan will ban Russian oil imports “in principle” as part of a G7 campaign, despite the country’s heavy reliance on energy imports.
    • In Australia, the ASX 200 fell more than 1% to below 7,150, hitting its lowest in nearly 2 months, with technology and mining stocks leading the decline.
      • Traders digested the RBA’s latest monetary policy statement where it said inflation could exceed its expectations this year and that it will need to raise interest rates further.
      • Supporting the move were Aussie unemployment that is forecasted to drop to its lowest since 1974. TE
  • Crude oil WTI rallied to  $109.8 /bl, and holding onto gains achieved last week. The price setting a 6-week high in the previous session.
    • Traders citing, a pledge by the G7 to ban Russian oil imports, as well as a cut in official prices by Saudi Arabia and China’s ongoing lockdowns.
    • The leaders of the group of industrialized nations made the promise as they met with Ukrainian President Volodymyr Zelenskyy to stress their support and display unity among western allies on Victory in Europe Day.
  • Gold declined and traded to $18740/oz after a 3-week decline and remained under pressure from a strong dollar and elevated Treasury yields.
    • Traders continued to bet on further Fed tightening to bring decades-high inflation under control, even at the risk of some economic pain.
    • The metal is down more than 6% from its April high as the dollar traded at its highest in 20 years against a basket of major currencies, while the benchmark US 10-year yield held firmly above 3.1%. Kitco metals
  • The US dollar traded above the 104 and in turn hitting a fresh 20-year high.
    • Traders citing expectations of further Federal Reserve monetary tightening to combat inflation and fears of slowing global economic growth drove investors into the safety of the dollar.
    • Uncertainties surrounding the outlook for inflation, the war in Ukraine and Chinese lockdowns were among the factors that spurred safe-haven demand for the dollar.
    • Investors now look ahead to fresh inflation data due on Wednesday to gain insight on the central bank’s possible next steps.
    • Futures markets are pricing a 75 basis point rate increase at the Fed’s next meeting in June and more than 200 basis points of tightening by year-end. Fx news
    • Bitcoin continued to drop this weekend after a broader stock sell-off in the U.S. last week sent the cryptocurrency market into a frenzy and prompted bitcoin to plummet by roughly 10%.
      • Over the last 12 months, its price fell by 41.83 percent.
      • Looking back, over the last four weeks, Bitcoin lost 23.37 percent.
      • In total decreasing $3,067.8 or 8.42 percent since the previous trading session.
      • The world’s largest digital currency by market value was lower by about 3% at $33,438.03 late Sunday, according to data from Coin Metrics.
    • Dozens are feared dead after a school in the Luhansk region in east Ukraine was hit by Russian shelling. Ukraine’s President Volodymyr Zelenskyy said that 60 people had died in the attack.
    • US President Joe Biden met virtually with Ukrainian President Volodymyr Zelenskyy and his G7 counterparts on Sunday. G7 leaders reassured Zelenskyy that they will continue to provide military and economic help.
    COVID-19 SOURCE Cases / Deaths / Recoveries
    • World 517,360,077 / 6,276,534 / 472,131,791
    • USA  83,851,715 / 1,024,546 / 80,944,857
    • SA 3,841,388 / 100,523 / 3,679,053
    Copyright © 2022 RussellStone Treasury All rights reserved. Our mailing address is: Want to change how you receive these emails? You can update your preferences or unsubscribe from this list.