Daily Market Report 3 Oct:
Key Market Drivers:
- US ADP Employment Data: ADP employment data for September showed a slight increase, breaking a five-month trend of slower growth, but the overall labor market remains tilted towards weakness.
- Middle East Conflict: Israel bombed Beirut following its deadliest day in the Lebanese front, escalating tensions and raising concerns about broader Middle Eastern conflict and potential global market impacts.
- Japan’s Monetary Policy: Remarks by Japan’s Prime Minister Ishiba opposing further interest rate hikes contributed to yen weakness, aligning with the Bank of Japan’s cautious stance on reducing stimulus.
Key Economic Indicators:
- US ISM Services PMI: Expected to remain in expansion territory, providing insights into the resilience of US consumer spending under tight credit conditions.
- Durable Goods Orders: August data is expected to confirm demand stalled, offering mixed signals about future US manufacturing activity.
- US Labor Market: This week’s data, including unemployment and nonfarm payrolls, is critical as it tests the Fed’s soft landing thesis, with expectations of moderate strength.
South African Economic Highlights:
- Transnet & Private Sector: Transnet is set to allow more private sector involvement in its operations, which could enhance efficiency and relieve constraints on the economy.
- Public Servant Wage Rejection: Public servants rejected the government’s 3% wage offer, highlighting tensions in labor negotiations.
- Mining Sector: Industry leaders emphasized the need for a larger exploration fund to boost mining, a vital sector for SA’s economy.
Market Movements:
- ZAR Performance: The USD saw strength due to Middle East tensions and strong US labor data, placing pressure on the ZAR. While the ZAR has been the best-performing emerging market currency, a correction was overdue after significant appreciation.
Market Insight:
- Fixed Income: SA bonds corrected this week following a strong rally, aligning with the ZAR’s pullback. The spread between SA and US 10-year bonds widened, enhancing SA bonds’ attractiveness.
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