Bulls n Bears Daily Market Commentary : 18 January 2022

Wed Jan 19 06:06:51 CAT 2022

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Bulls n Bears Daily Market Commentary : 18 January 2022

 <mailto:info at bulls.co.zw> 

ZSE commentary

The All-Share Index went up by a margin of 0.17% to close at 12,231.70 points. AXIA jumped $5.3687 to $50.3687, MEDTECH HOLDINGS climbed $1.1765 to $21.1765 whilst ECONET WIRELESS edged $0.8742 up to settle at $96.0491. FIRST MUTUAL PROPERTIES rose by $0.4161 to $7.4482 while SIMBISA BRANDS increased by $0.3647 to $128.7663.

Gains were offset by MEIKLES LIMITED which retreated by $6.5571 to $142.6000, UNIFREIGHT trimmed $5.0000 to $25.0000 and SEEDCO LIMITED dipped $1.4028 to $111.5972. OK ZIMBABWE slid $1.0340 to $26.7678 together with FIDELITY LIFE ASSURANCE which let go $0.9412 to end at $14.0588..-zse

Global Currencies & Equity Markets

South Africa

South African Rand Seen Lower into Fed Decision

The South African Rand eased lower early in the new week following a strong start to the year and some analysts say this is to be expected ahead of the January 26 Federal Reserve (Fed) monetary policy decision, the nearing proximity of which is potentially supportive of the Dollar.

The Rand ceded ground to a firming Dollar on Tuesday but its decline was limited and enough to enable the South African currency to edge higher against many of the other major currencies including Pound Sterling.

The South African currency still retained its position as the top performer among G20 currencies for the fledgling year, however, while Pound to Rand exchange rate losses for 2022 reached -2.2% as it slipped back beneath the 21.00 handle on Tuesday.

USD to ZAR daily

The U.S. Dollar rose against most counterparts on Tuesday, seemingly drawing a line under losses from the prior week, and the Rand Merchant Bank team has warned that it could remain an uplifting influence on USD/ZAR ahead of the next Fed decision on January 26.

While movements in the Dollar are influential, the Rand is also likely to be responsive to Wednesday’s release of inflation figures for December as these could impact market expectations for South African Reserve Bank (SARB) monetary policy and appetite for South African assets.

Wednesday’s inflation figures are doubly important because prices in some financial markets have recently implied that investors are anticipating a lengthy series of interest rate rises that would lift the SARB’s cash rate by a total of 2% over the course of this year.

These are potentially misplaced expectations given the recent and ongoing weakness in some measures of South African inflation pressures.

Economists widely expect the annual rate of inflation to have risen from 5.5% to 5.7% in December, which would leave it near the top of the SARB’s three-to-six percent target band, although the more important “core inflation” rate is expected to remain at 3.3% and near the bottom of that band.

The core inflation rate overlooks changes in prices of energy, food and some other items, which can all change for reasons unrelated to domestic economic momentum, and so this measure can sometimes be more influential among central bankers.

Should recent weakness in the core inflation measure persist it could eventually result in market expectations of the SARB being disappointed, which would be a likely headwind for the South African Rand.

Nigeria

Naira Succumbs to FX Demand Pressure, Loses 0.12%

The Naira depreciated by 50 kobo or 0.12 per cent against the Dollar at the Investors and Exporters (I&E) segment of the foreign exchange (FX) market on Monday.

The exchange rate of the local currency against the greenback closed yesterday at N416.50/$1 compared with N416.00/$1 it ended at the preceding trading session, which was last Friday.

The domestic currency suffered the loss yesterday amid an increase in the demand for forex at the special FX market window created by the Central Bank of Nigeria (CBN) to meet the needs of high forex users.

According to data from the FMDQ Securities Exchange, the turnover for the session stood at $146.87 million, 19.0 per cent or $23.47 million higher than the $123.40 million achieved on the final trading day of last week.

The Nigerian currency also suffered the same fate at the interbank segment of the market yesterday as its value depreciated by 21 kobo or 0.1 per cent against the American currency to trade at N415.00/$1 in contrast to the preceding session’s N414.79/$1.

However, the Naira appreciated against the Pound Sterling at the same market window by N2.23 to trade at N567.06/£1 compared with N569.29/£1 of the previous session and also closed stronger against the Euro by N1.50 to sell for N473.72/€1 in contrast to N475.22/€1 it finished last Friday.

A look at the cryptocurrency market indicated that the battle between the bears and bulls continued, though five of the 10 tokens tracked by Business Post closed bullish.

Cardano (ADA) rose by 12.7 per cent to trade at N912.16, Litecoin (LTC) moved up by 4.3 per cent to trade at N87,075.16, Dogecoin (DOGE) gained 1.4 per cent to sell at N102.82, Tron (TRX) improved by 1.1 per cent to quote at N40.33, while Dash (DASH) gained 0.2 per cent to trade at N78,089.50.

On the flip side, Bitcoin (BTC) lost 3.3 per cent to finish at N23,769,999.99, Binance Coin (BNB) fell by 3.9 per cent to trade at N196,963.21, Ethereum (ETH) declined by 2.9 per cent to sell at N1,850,811.95, Ripple (XRP) went down by 0.6 per cent to N444.55, while the US Dollar Tether (USDT) dropped 0.3 per cent to N573.48.

 <mailto:info at bulls.co.zw> 

Global Markets

US dollar reverses losses as investors eye central bank speeches

Senior Market Analyst at Ebury, Chartered Financial Analyst. Providing expert currency analysis so small and mid-sized businesses can effectively navigate international markets.

The US dollar regained a portion of its recent losses as markets opened for the week on Monday, with the dollar index up around half a percent on last week’s two month lows.

There has been no clear catalyst for the move higher in the greenback in the past couple of trading sessions, although an advance in US Treasury yields on Friday and a possible reassertion in the classical trend between the dollar and bond markets may have been behind the move. US bond markets were closed on Monday due to the Martin Luther King Jr. holiday, although the yield on the 10-year Treasury has risen to its highest level in nearly two years, having increased by around 7 basis points for the day on Friday. Investors may have also viewed the recent sell-off in the US currency, and the move higher in EUR/USD in particular, as slightly overdone given the recent hawkish pivot from the Federal Reserve, and little chance of higher ECB rates any time soon.

We are, however, beginning to see signs of dissent among a handful of European Central Bank members, and that presents somewhat of an upside risk to the common currency. ECB President Lagarde said late-last week that the bank would take any measures necessary to bring inflation back down to target, while Vice President de Guindos has stated in the past few days that inflation is not as transitory as first believed. Signs of a growing chorus of hawkish dissent among council members in this Thursday’s ECB meeting will be hard for investors to ignore, as would a hawkish tilt from Lagarde during her speech on Friday. We will be paying similarly close attention to this morning’s ZEW economic sentiment survey, and Thursday’s revised Euro Area inflation data for December. Upside surprises in either could provide ammunition for a euro rally.

This week also looks likely to be a busy one in the UK, not least due to the ongoing dissatisfaction with Boris Johnson’s government for breaching lockdown restrictions during the height of the pandemic. November labour data (this morning), revised December inflation figures (Wednesday) and retail sales (Friday) make for a rather hectic week of macroeconomic news. Bank of England governor Andrew Bailey will also be speaking on Wednesday. Since the December interest rate hike, markets have been frantically pricing in a second rate increase from the BoE at its February meeting. Should Bailey pour cold water on another hike so soon, then sterling would sell-off sharply. We do, however, think that the opposite is far more likely, which could provide scope for a bit of a move higher in the pound in the second half of the week.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Gold falls on stronger U.S. dollar

(Xinhua) -- Gold futures on the COMEX division of the New York Mercantile Exchange fell on Tuesday as the U.S. dollar strengthened.

The most active gold contract for February delivery fell 4.1 U.S. dollars, or 0.23 percent, to close at 1,812.4 dollars per ounce.

Downbeat economic data released on Tuesday gave gold certain support, preventing it from falling further. New York Fed Empire state manufacturing index fell to negative 0.7 in January from 31.9 in the prior month. It was the first decline in the index since June 2020.

The National Association of Home Builders/Wells Fargo Housing Market Index decreased one point to 83 in January.

Silver for March delivery rose 57.4 cents, or 2.5 percent, to close at 23.492 dollars per ounce. Platinum for April delivery rose 14.9 dollars, or 1.54 percent, to close at 979.5 dollars per ounce. ■

Copper dragged down by strong dollar ahead of Fed meeting

(Reuters) - Copper prices succumbed to pressure from the dollar on Tuesday as the market anticipated a more hawkish tone from the U.S. Federal Reserve in the run-up to monetary tightening in March.

The Fed meets next week after fairly aggressive comments from officials about how tough they could be in the fight against inflation.

This led to a jump in U.S. Treasury yields that lifted the dollar index to its highest in six days and undermined the appeal of dollar-denominated commodities.

Risk sentiment was lower as a result, dragging stocks and some commodities lower, said Commerzbank analyst Daniel Briesemann.

Benchmark three-month copper on the London Metal Exchange (LME) eased 0.7% to $9,662 a tonne by 1735 GMT.

POSITIONING: Speculators bet on prices falling, evidenced by a net short position of 12.83% of open interest, estimates by broker Marex showed. This is its highest since May 2020.

INVENTORIES: Copper stocks continued to trend higher, with inventories in LME-registered warehouses climbing by 2,000 tonnes to their highest in two months at 94,525 tonnes.

COPPER EXPORTS: Refined copper exports from China hit a record high in 2021, customs data showed, after international prices encouraged traders to ship metals overseas. read more

TIN: Benchmark LME prices for the metal used in solder for electronics hit a record $42,335 a tonne, underpinned by low inventories and stable demand. Later it was up 1.5% at $42,315.

EUROPE: Industry association Eurometaux has asked EU policymakers to allow member states to support domestic producers of aluminium, zinc and silicon with state aid to ensure supplies of the metals crucial for the transition to low-carbon energy.

OTHER METALS: LME aluminium was back above $3,000 a tonne, helped by low inventories and risks to supply. It climbed 0.7% to $3,019 a tonne.

Zinc added 1.4% to $3,559, lead eased 1.4% to $2,323 and nickel was up 0.1% at $22,085.

The Thomson Reuters Trust Principles.

INVESTORS DIARY 2022

Company

Event

Venue

Date & Time

Counters trading under cautionary

ART

Seed co Int.

Starafrica

Medtech

Turnall

Seed co

Invest Wisely!

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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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