8 Oct

Daily Market Report 8 Oct

Global Economic Factors:

  1. Fedspeak: The New York Fed President expressed confidence in a soft landing for the U.S. economy, with the Fed expected to cut interest rates by 25 basis points twice by the end of the year. However, if the economy weakens faster than anticipated, adjustments to this plan may be necessary.

  2. China’s Economic Stimulus: While Chinese officials have voiced confidence in achieving economic targets for the year, the market had anticipated more significant stimulus measures. This suggests that further support may be announced soon.

  3. Japan Wage Growth: Though real wage growth in Japan turned negative, the overall trend remains strong, bolstering the Bank of Japan’s confidence in achieving sustainable inflation, potentially allowing for further interest rate hikes.

Key Events to Watch:

  1. FOMC Meeting Minutes: The minutes from the September meeting will provide insights into the 50-basis-point rate cut. This will be crucial for understanding the Fed’s stance on future rate cuts.

  2. US CPI Data: Expected on Thursday, the September CPI could offer signs of disinflation, which is critical for shaping Fed policy.

  3. US Consumer Sentiment: The October consumer confidence data is anticipated to show marginal improvement, though unemployment expectations remain a concern.

U.S. Political Landscape:

Recent polling shifts in the U.S. show Donald Trump gaining momentum over Kamala Harris ahead of the elections. This shift raises questions about the economic implications of a potential Trump victory, with uncertainties surrounding trade wars with China, fiscal policies, and military involvement in global conflicts. South Africa’s geopolitical stance on Russia and Israel could face challenges under a Trump presidency, potentially affecting its trade relations and financial markets.

Forex Market:

The USD/ZAR is influenced by U.S. CPI data, the Fed’s monetary policy direction, and the U.S. election. The dollar remains strong, supported by solid U.S. jobs data, while the ZAR awaits further clarity on these factors.

Fixed Income Market:

U.S. bond yields surged following stronger-than-expected U.S. labor market data, with domestic bond yields in South Africa following suit. The bond market will focus on today’s auction and upcoming U.S. inflation data to gauge future rate cuts.

Commodities:

  • Energy: Oil prices surged due to escalating tensions in the Middle East but corrected slightly.
  • Soft Commodities: Egypt plans to reduce wheat imports by incorporating corn flour to save costs, though this plan faces resistance from millers and bakers.
  • Metals: Gold prices remained steady ahead of key U.S. economic data, while a lawsuit involving the London Metal Exchange over nickel trades was dismissed.

Why Choose TreasuryONE?

Minimise the impact of market volatility on your bottom line by getting access to an experienced team of dealers that provides expert market advice – validated by facts and figures, not feelings or hearsay.

We customise risk management strategies to achieve the most competitive rates in a fast-moving and complex marketplace.

We provide effective and measurable processes for managing:

  • Exchange Rate Risk arises when an organisation conducts business in multiple currencies, either through exports and imports, or through foreign operations.
  • Commodity Price Risk is the financial risk posed to an entity’s financial performance and profitability by fluctuations in commodity prices that are primarily driven by external market forces and are therefore beyond the entity’s control.
  • Interest Rate Risk management for companies involves identifying, measuring, and managing the potential impact of changes in interest rates on a company’s financial position and profitability.