Bulls n Bears Daily Market Commentary : 10 November 2021

Thu Nov 11 06:46:46 CAT 2021

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Bulls n Bears Daily Market Commentary : 10 November 2021

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ZSE commentary

The ZSE closed with gains across the board with performance being lifted by gains in blue-chip counters. Activity levels remained below average at 407 trades. Delta was the most active stock at 34 trades followed by Star Africa and National Foods at 32 and 29 trades respectively. Investor sentiment was mixed but skewed to the positive after the session yielded 18 risers against 10 fallers while seven of the active stocks remained unchanged. First Mutual Properties anchored volume aggregate trading 5 340 600 shares and National Foods anchored value aggregate with a value of ZW$77.06 million contributing 28.2% to total turnover. The All-Share Index added 2.02% to go past the key 12 000 level at 12 273.97 points. The Top 10 Index added 3.11%. The Top 15 Index also added 2.63%. The Medium Cap Index was down by 0.81% to 22 010.95 points whilst the Small Cap Index added 2.86% to 382 700.17 points.

Leading the risers pack of the day was Zimre Holdings adding 18.34% and Meikles up by 11.95%. General Beltings gained 11.12% and Medtech gained 10.91% to 15.96c. Zimplow was up by 7.79%. Mitigating the gains were losses in First Mutual Properties and RTG which shaded 13.64% and 13.01% respectively. Wildale was down by 5.53% to 320.73c. Unifreight and Mashonaland Holdings pared 5.41% and 4.31% respectively. The Old Mutual Top Ten ETF closed at 472.57c up by 0.23% after 15 650 units were traded worth ZW$73 957.60 in 27 trades.-wealthaccess

Global Currencies & Equity Markets

South Africa

South African rand to start losing ground

What has been driving the EUR/ZAR pair’s rate in 2021 and what’s the euro to rand prediction as we head into 2022? In this article we look at the latest analysts’ EUR/ZAR forecasts and what to consider when trading the EUR against the South African rand.

The South African rand is not a heavily traded currency, yet the euro to rand news has risen in prominence over the past year. It’s one of the best performing emerging-market currencies. 

>From the beginning of this year to 26 October, the South African rand has strengthened by nearly 10% as the EUR/ZAR exchange rate fell from about 19.01 to 17.34.

According to Silicon Valley Bank’s chief currency strategist Steve Petruska, the rand benefitted from the reflation trade narrative, higher local interest rates and rising commodity prices in the early part of the year. 

The rand gained almost 14% between January and June as the EUR/ZAR rate fell to a 52-week low of 16.31 in early June. However, according to experts at South African lender Nedbank, over the past couple of months the currency has shed some of those gains with other emerging markets raising rates and commodity prices softening from record highs. 

Currently, the EUR/ZAR pair is trading range bound with minimal movements as traders wait for South Africa’s first Medium Term Budget Policy Statement to be released on 11 November. 

EUR/ZAR price rate year-to-date

EUR/ZAR technical analysis

Current market sentiment for the EUR/ZAR pair expects the rand to continue to lose some of the momentum it gathered early in the year. 

According to a recent report by Nedbank, the euro vs rand forecast is for a rise to 17.82 by the end of the year and to stay within the 17.6-17.7 range in 2022. A recent report by Dutch lender ING also forecast a similar range for the pair over the coming months. 

At the time of writing (10 November), data from capital.com shows trader sentiment at 86% bullish and 14% bearish. The data is calculated automatically, based on open positions for EUR/ZAR on the platform. It should not be considered an incentive to trade the asset.

Nigeria

Naira gains 3.6% to trade N540/$1 at parallel market

The Nigerian naira has appreciated by 3.6% to N540/$1 at the parallel market — almost four months after the Central Bank of Nigeria (CBN) stopped FX sales to Bureaux De Change (BDCs) operators.

The local currency gained N20 to close at N540 on Wednesday from N560 it opened the weekly trading on Monday.

Bureaux De Change traders in Lagos told TheCable that the market had been experiencing massive gain against the greenback since last week.

Abubakar Salisu, a BDC trader, said they are now very reluctant to sell or buy at any certain rate except they get accurate confirmation from other operators.

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In July, the apex bank accused BDC operators of working with corrupt people to conduct money laundering in Nigeria.

Godwin Emefiele, governor of the apex bank, had said CBN received about 5,000 applications every month for BDC registration, adding that the operators are making efforts to dollarise the Nigerian economy.

In September, the apex bank also went after Oniwinde Adedotun, the founder of abokiFX — a web platform that reports movements in the foreign exchange market since as early as 2014. 

It accused abokiFX Limited of conducting “illegal foreign exchange transactions” through its daily parallel market data information.

The move forced the management of AbokiFX to shut down the data information segment of its platform.

Speaking at the ongoing Paris Peace Forum on Wednesday, Emefiele said the country’s forex reserves above $40 billion can cater for investors’ repatriation of profit.

Since July that the apex bank stopped forex sales to BDCs, the nation’s foreign reserves climbed $8.49 billion from $33.3 billion to $41.8 billion.

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Global Markets

Dollar climbs with rate hike speculation raging on U.S. inflation surge

(Reuters) - The dollar index jumped sharply on Wednesday, hitting its highest level since July 2020, after U.S. consumer prices surged to their highest rate since 1990, fueling speculation that the Federal Reserve may raise interest rates sooner than expected.  

The consumer price index rose 0.9% last month after gaining 0.4% in September and in the 12 months through October, the consumer price index accelerated 6.2%. the U.S. Labor Department said on Wednesday, while analysts expected on average the rise to be limited to 5.8%.

At 1543 EDT (2043GMT), the dollar index, which measures the greenback against other major currencies, was up 0.96% at 94.8580 after reaching a high of 94.876, its highest level in more than 15 months.

While the Fed last week restated its belief that the current  inflation surge would be short-lived, many investors were suggesting stickier than expected inflation may force the Fed to increase interest rates. 

The dollar added to its gains as the session wore on with help from the easing of a rally in gold prices and the expiration of euro/dollar options, according to Bregar.

Then greenback got a further boost after 1300 EDT following a weak 30-year bond auction that pushed U.S. treasury yeilds higher.   

The euro was last down 1% at $1.1481 after earlier touching $1.1480, its lowest level since July 21 2020.

Meanwhile sterling fell to its lowest level since December 23 while Britain and the European Union looked far from finding a post-Brexit agreement over Northern Ireland, adding to pressure from the U.S. inflation data. 

Sterling was last down 1.12% at $1.3406 after blowing past Friday's low $1.3425, when the currency was hammered by the Bank of England's surprise decision to keep rates unchanged.   

In cryptocurrencies, bitcoin jumped to an all-time high of $69,000.00 after the U.S. inflation data but proceded to lose ground and was last down 1% at $66,221.75.   

While the Federal Reserve is already tapering its bond buying, Nancy Davis, founder of Quadratic Capital Management in Greenwich, Connecticut said "rate hikes might not be enough to reverse inflation" because the Fed doesn't control supply chain bottlenecks and fiscal spending.

Against Japan's yen the greenback was last up 0.89% to 113.875 yen after touching a session high of 114 yen.

On Tuesday the dollar had hit a month-low against the yen. 

Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York said the "pretty shocking" inflation data including sharp housing price increases suggest that high consumer prices are "not likely to prove transitory."

The Australian dollar was down 0.64% against the greenback at $0.733 after earlier hitting $0.73270, its lowest level since Oct. 13. The New Zealand dollar was down 0.95% at $0.7064.

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Commodities Markets

Gold rate today falls for first time in 5 days, silver price slips

Gold rates today remained flat as uncertainty over economic recovery supported gold at lower levels while a stronger dollar put pressure at higher levels, say analysts

Gold prices slipped today after the recent upmove as stronger US dollar weighed on the precious metal. On MCX, gold futures dipped to ₹48,265 per 10 gram after a four-day rising streak. Silver futures slipped to ₹64,507 per kg. 

In global markets, spot gold fell 0.4% to $1,823.84 per ounce as the dollar firmed and yields rose ahead of US inflation data. Among other precious metals, spot silver fell 0.6% to $24.13 per ounce, platinum declined 0.6% to $1,052.75 per ounce, and palladium dipped 0.04% to $2,020.26 per ounce.

A stronger-than-expected reading in US consumer prices could be a headwind for gold, say analysts. Gold has been hovering around three-month high over the past few sessions after assurances from key central banks last week that interest rates would remain low for the time being. 

Low rates reduce the opportunity cost of holding gold, which yields no interest.

A rise in US bond yields also put pressure on gold. The dollar today gained 0.34% against its rivals, making gold expensive to holders of other currencies.

(With Agency Inputs)

Oil prices plunge into close, roiled by inflation fears

(Reuters) - Oil prices slumped on Thursday, hit by a surge in the dollar after U.S. President Joe Biden said his administration was looking for ways to reduce energy costs amid a broader surge in inflation.

Brent and U.S. crude futures dropped sharply at the end of the session as traders sold out of riskier assets, including stocks and commodities, driven by expectations that central bankers will take steps to curb rising prices.

Consumer inflation data on Wednesday showed U.S. prices were rising at a 6.2% year-over-year rate, their fastest rate in three decades, and may spur both the White House and U.S. Federal Reserve to take action to head that off. That boosted the dollar, which often trades inversely to oil. read more

Brent crude futures settled down $2.14, or 2.5%, to $82.64 a barrel. That contract hit a high of $85.50 on the session before retreating. U.S. crude settled down $2.81, or 3.3%, to $81.34 after reaching a high of $84.97 a barrel, just off seven-year highs touched in the last few weeks.

Inflation is heating up as the economic drag from the summer wave of COVID-19 infections fades and supply bottlenecks persist. The Federal Reserve is expected to try to stave the ongoing increase in prices, which has lasted longer than originally anticipated. read more

That sparked a rally in the dollar, which undermines the price of oil as it raises the cost for other nations because oil is largely transacted in dollars.

Biden said he asked the National Economic Council to work to reduce energy costs and the Federal Trade Commission to push back on market manipulation in the energy sector in a larger effort to reverse inflation.

Separately, U.S. crude inventories rose by 1 million barrels in the most recent week, short of estimates for a 2.1 million build in crude stocks.

Several traders said on Thursday that prices could continue to rise in coming months, but noted as well that an ongoing rally could spur more shale industry production that would offset demand. read more

The market has rallied in recent days on expectations that the Organization of the Petroleum Exporting Countries, led by Saudi Arabia, along with other exporting allies, would maintain a steady increase in output.

High prices could encourage the U.S. shale oil industry to unleash 1 million bpd into the global market, said Marco Dunand, chief executive at Mercuria Energy Trading, speaking at the Reuters Commodity Trading Summit. read more

OPEC+, as the wider exporting group is called, rebuffed calls by the White House to boost production. U.S. output was most recently at 11.5 million barrels per day, still short of the near-13 million bpd reached in late 2019.

The White House has tiptoed around the possibility of releasing oil from the U.S. Strategic Petroleum Reserve amid concern over recent soaring gasoline prices. Generally, the U.S. taps the SPR in the case of emergencies, like hurricanes. read more

The Thomson Reuters Trust Principles.

INVESTORS DIARY 2021

Company

Event

Venue

Date & Time

National Unity Day

December 22

Christmas Day

December 25

Boxing Day

December 26

Public Holiday in lieu of Boxing Day falling on a Sunday

December 27

Counters trading under cautionary

ART

Seed co Int.

Starafrica

Medtech

Turnall

Seed co

Invest Wisely!

Bulls n Bears 

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DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of Faith Capital (Pvt) Ltd for general information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy or subscribe for any securities. The information contained in this report has been compiled from sources believed to be reliable, but no representation or warranty is made or guarantee given as to its accuracy or completeness. All opinions expressed and recommendations made are subject to change without notice. Securities or financial instruments mentioned herein may not be suitable for all investors. Securities of emerging and mid-size growth companies typically involve a higher degree of risk and more volatility than the securities of more established companies. Neither Faith Capital nor any other member of Bulls ‘n Bears nor any other person, accepts any liability whatsoever for any loss howsoever arising from any use of this report or its contents or otherwise arising in connection therewith. Recipients of this report shall be solely responsible for making their own independent investigation into the business, financial condition and future prospects of any companies referred to in this report. Other  Indices quoted herein are for guideline purposes only and sourced from third parties.

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