Bulls n Bears Daily Market Commentary : 19 May 2022

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Bulls n Bears Daily Market Commentary : 19 May 2022

 

 	

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ZSE commentary

 

Market in marginal losses


The ZSE recorded marginal losses in the penultimate session of the week
amidst constrained liquidity. The AllShare Index and the Old Industrials
lost a similar 0.93% to see the former close at 20792.40pts and the latter
at 68605.26pts. The ZSE Top Ten Index declined 1.06% to settle at
13351.99pts while, the Mid cap Index lost an insignificant 0.00001% to end
at 37572.53pts. Turnall extended its losses from the prior session after
plunging 13.40% to close at $4.8131. Brick manufacturers Willdale dropped
12.16% to end at $2.7200, as Mashonaland tripped 10.42% to $3.2934. Property
company FMP trimmed 5.86% to settle at $6.9858 reversing prior session’s
gains. Construction group Masimba capped the top five shakers of the day on
a 5.26% retreat to $60.0000 on scrappy 500 shares.

 

Truworths headlined the gainers of the day on a 15.00% surge to $1.7250
while, Ariston strengthened yesterday’s gains on a 6.46% uplift to $3.9250.
Dairibord put on 1.60% to $53.0000 while, Star Africa added 1.53% to
$1.9993. First Mutual Holdings rose 1.12% to $16.3587 as it completed the
top five winners of the day. Volume of shares grew 16.22% to 0.91m shares
while, turnover jumped 87.62% to $173.01m. Delta, OKZIM, Simbisa, Econet and
Innscor anchored the volume aggregate as they accounted for a shared 72.80%
of the outturn. Heavies Delta, Innscor, Simbisa and Econet were the top
value drivers of the day with respective contributions of 52%, 20.28%,
11.89% and 9.17%. Local purchases accounted for 97.78% of turnover while,
sales accounted for 61.05% of the same. On the VFEX, Bindura dipped 19.96%
to $0.0393 on 739,170 shares. Datvest MCS slumped 2.64% to $2.0350, as Old
Mutual ETF went down 0.47% to $9.2019 while, Morgan and Company ETF was
stable at $25.0000. Elsewhere, African Sun released Q1 trading update in
which it reported a top-line growth of 242% to $1,65bn in inflation adjusted
terms

. EFE Securities

 

 <mailto:info at bulls.co.zw> 

 

Global Currencies & Equity Markets

 

 

South Africa

 

South Africa’s rand firms ahead of rate decision

JOHANNESBURG: The South African rand firmed in early trade on Thursday as
the US dollar eased, and as investors await a central bank rates decision
where a hike is expected to contain high inflation.

 

At 0606 GMT, the rand traded at 16.0525 against the dollar, 0.31% firmer
than its previous close.

 

The safe-have dollar index edged lower as signs of an easing in Shanghai’s
coronavirus lockdown lifted appetite for riskier assets in the global
market.

 

Investors await the South African Reserve Bank’s monetary policy decision,
to be announced at a media briefing due to start at 1300 GMT.

 

South Africa’s rand recoups losses; firmer dollar, power crisis weigh

 

A Reuters poll published on Friday forecast the bank would make its first 50
basis-point repo rate hike in more than six years, taking it to 4.75%, to
prevent potential second-round effects from higher consumer prices.

 

Consumer price inflation remained at a five-year high of 5.9% in April, just
within the central bank’s 3%-6% target range, according to data published by
Statistics South Africa earlier on Wednesday.

 

In fixed income, the yield on the benchmark 2030 bond was up 1.5 basis
points to 9.995%.

 

 

 

Nigeria

 

Naira depreciates further, exchanges at N420.33 against the dollar

The Naira, on Thursday, exchanged at 420.33 to the dollar at the Investors
and Exporters window, compared to 419.25 traded on Wednesday, representing
0.26 per cent depreciation.

 

 

The open indicative rate closed at N417.70 to the dollar on Thursday.

 

An exchange rate of N444.00 to the dollar was the highest rate recorded
within the day’s trading before it settled at N420.33.

The Naira sold for as low as 410 to the dollar within the day’s trading.

 

A total of 75.56 million dollars was traded in foreign exchange at the
official Investors and Exporters window on Thursday. (NAN)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 <mailto:info at bulls.co.zw> 

 

 

 

Global Markets

 

The euro is nearing parity with the dollar: Here’s what it could mean for
investors

As of Wednesday afternoon in Europe, the euro was hovering just above $1.05,
having been in steady decline for almost a year, down from around $1.22 last
June.

 

Sam Zief, global head of FX strategy at JPMorgan Private Bank, told CNBC on
Wednesday that the path to parity would require “a downgrade in growth
expectations for the euro area relative to the U.S., akin to what we got in
the immediate aftermath of the Ukraine invasion.”

 

The euro sign sculpture stands outside the former European Central Bank
(ECB) headquarters in Frankfurt, Germany, on Sunday, July 3, 2016.

 

The euro is nearing parity with the U.S. dollar for the first time in 20
years, but currency strategists are divided on whether it will get there,
and what it will mean for investors and the economy.

 

As of Thursday morning in Europe, the euro was hovering around $1.05, having
been in steady decline for almost a year, down from around $1.22 last June.
The common currency slid to just above $1.03 earlier this week.

 

The dollar has been strengthened by risk aversion in markets as concerns
about Russia’s war in Ukraine, surging inflation, supply chain problems,
slowing growth and tightening monetary policy have driven investors toward
traditional “safe haven” assets.

 

The narrowing between the two currencies has also been driven by divergence
in monetary policy among central banks. The U.S. Federal Reserve earlier
this month raised benchmark borrowing rates by half a percentage point, its
second hike of 2022, as it looks to rein in inflation running at a 40-year
high.

 

Fed Chairman Jerome Powell said on Tuesday that the central bank will not
hesitate to continue raising rates until inflation comes down to a
manageable level and repeated his commitment to bring it closer to the Fed’s
2% target.

 

The European Central Bank, by contrast to the Fed and the Bank of England,
has yet to raise interest rates despite record high inflation across the
euro zone. However, it has signaled the end of its asset purchase program
and policymakers have struck a more hawkish tone of late.

 

ECB policymaker Francois Villeroy de Galhau said on Monday that excessive
euro weakness threatens price stability in the bloc, increasing the cost of
dollar-denominated imported goods and commodities and further fueling the
price pressures that have driven euro zone inflation to record highs.

 

What would it take to get to parity?

Sam Zief, global head of FX strategy at JPMorgan Private Bank, told CNBC on
Wednesday that the path to parity would require “a downgrade in growth
expectations for the euro area relative to the U.S., akin to what we got in
the immediate aftermath of the Ukraine invasion.”

 

“Is that possible? Sure, but it’s certainly not our base case, and even in
that case, it does seem like euro at parity becomes your worst case
scenario,” Zief said.

 

Loading chart...

He suggested that the risk-reward over a two to three-year period — with the
ECB likely escaping negative rate territory and fewer fixed income outflows
from the euro area — means the euro looks “incredibly cheap” at present.

 

“I don’t think there’s many clients that are going to look back in two to
three years and think that buying euro sub-$1.05 was a bad idea,” Zief said.

 

 

Why is the dollar so powerful?

He noted that the Fed’s aggressive interest rate hiking cycle and
quantitative tightening over the next two years are already priced into the
dollar, a view echoed by Stephen Gallo, European head of FX strategy at BMO
Capital Markets.

 

Gallo also told CNBC via email that it’s not just the prospect of material
policy divergence between the Fed and the ECB that will affect the EURUSD
pair.

 

“It’s also the evolution of the EUR’s core balance of payments flows, and
the prospect of additional negative energy supply shocks, which are also
dragging the currency lower,” he said.

 

 

We already are in a recession, investment firm CIO says

“We have not seen evidence of a large build-up in EURUSD short positions on
the part of leveraged funds in the data we track, which leads us to believe
that the EUR is weak because of a deterioration in underlying core flows.”

 

A move to parity between the euro and the dollar, Gallo suggested, would
require ECB “policy inertia” over the summer, in the form of rates remaining
unchanged, and a full German embargo on Russian fossil fuel imports, which
would lead to energy rationing.

 

“It would not be surprising to see ECB policy inertia continue if the
central bank is faced with the worst possible combination of higher
recession risk in Germany and additional sharp rises in prices (i.e. the
dreaded stagnation),” Gallo said.

 

“For the Fed’s part in all this, I believe the Fed would become alarmed by a
move to the 0.98-1.02 range in EURUSD, and this extent of USD strength vs
the EUR, and I could see a move to this area in EURUSD causing the Fed to
pause or slow its tightening campaign.”

 

Dollar ‘too high’

The dollar index is up around 8% since the start of the year, and in a note
Tuesday, Deutsche Bank said the “safe haven” risk premium priced into the
greenback was now at the “upper end of extremes,” even when accounting for
interest rate differentials.

 

Deutsche Bank Global Co-Head of FX Research George Saravelos believes a
turning point is close. He argued that we are now at a stage where further
deterioration in financial conditions “undermines Fed tightening
expectation” while a great deal more tightening remains to be priced in for
the rest of the world, and Europe in particular.

 

“We don’t believe Europe is about to enter a recession and European data –
in contrast to the consensus narrative – continues to outperform the U.S.,”
Saravelos said.

 

 

Finland’s Rehn says the ECB should move quickly with a rate hike

Deutsche Bank’s valuation monitor indicates that the U.S. dollar is now the
“world’s most expensive currency,” while the German lender’s foreign
exchange positioning indicator shows that dollar long positions against
emerging market currencies are at their highest since the peak of the
Covid-19 pandemic.

 

“All of these things give the same message: the dollar is too high,”
Saravelos concluded. “Our forecasts imply EUR/USD will go back up to 1.10
not down to parity in coming months.”

 

The case for parity

While many analysts remain skeptical that parity will be reached, at least
persistently, pockets of the market still believe that the euro will
eventually weaken further.

 

Interest rate differentials vis-à-vis the U.S. shifted against the euro
after the Fed’s June 2021 meeting, in which policymakers signaled an
increasingly aggressive pace of policy tightening.

 

Jonas Goltermann, senior markets economist at Capital Economics, said in a
note last week that the ECB’s recent hawkish shift has still not matched the
Fed or been enough to offset the increase in euro-zone inflation
expectations since the turn of 2022.

 

 

JPMorgan: Investors can monetize volatility in foreign exchange market

While Capital Economics expects the Fed’s policy path to be similar to that
priced in by markets, Goltermann expects a less aggressive than discounted
path for the ECB, implying an additional shift in nominal interest rate
differentials against the euro, albeit a much smaller one than that seen
last June.

 

Deteriorating euro zone terms of trade and a global economic slowdown with
further turbulence ahead – with the euro more exposed to financial
tightening due to the vulnerability of its periphery bond markets – further
compound this view.

 

“The upshot is that – contrary to most other analysts – we forecast the euro
to weaken a bit further against the dollar: we expect the EUR/USD rate to
reach parity later this year, before rebounding toward 1.10 in 2023 as the
headwinds to the euro-zone economy ease and the Fed reaches the end of its
tightening cycle,” Goltermann said.

 

 <mailto:info at bulls.co.zw> 

 

 

 

 

Commodities Markets



 

Copper price rebounds as China eases covid restrictions 

Copper prices rose on Thursday, buoyed by easing covid-19 restrictions in
China.

 

Shanghai will start allowing more businesses in zero-covid areas to resume
normal operations from the start of June, deputy mayor Zhang Wei said as the
city prepares for the end of lockdown.

 

“Sentiment had been buoyed by hopes that China is making progress towards an
exit from strict lockdowns,” commodity strategists at ANZ said in a note.

 

Copper for delivery in July rose 2.62% from Wednesday’s settlement price,
touching $4.28 per pound ($9,433 per tonne) midday Thursday on the Comex
market in New York.

 

Click here for an interactive chart of copper prices

 

The most-active June copper contract on the Shanghai Futures Exchange ended
daytime trading down 0.3% at 71,530 yuan ($10,576.04) a tonne.

 

Related: China’s metal exports storm higher to fill gap left by war

 

(With files from Reuters)

 

 

 

Oil swings wildly, rebounding to gains after steep losses

Oil prices rebounded from earlier losses in another volatile session on
Thursday as Chinese officials planned to ease restrictions in Shanghai,
which could further tighten global energy supply, and as the dollar
retreated from recent gains.

 

Crude benchmarks continued their spate of wild swings, with both Brent and
U.S. crude rising by nearly $5 a barrel in the span of a few hours,
recovering from losses earlier in the week.

 

Brent crude futures for July ended the day at $112.04 per barrel for a gain
of 2.7%. U.S. West Texas Intermediate (WTI) crude futures for June settled
$2.62, or 2.4%, higher at $112.21 per barrel.

 

“The market has been extremely volatile,” said Andrew Lipow, president of
Lipow Oil Associates in Houston. “The market is reacting to all sorts of
different headlines hour to hour, and the movement in oil markets on a
day-by-day basis getting even more exaggerated.”

 

In China, investors are closely watching plans to ease coronavirus curbs
from June 1 in the most populous city of Shanghai, which could lead to a
rebound in oil demand from the world’s top crude importer.

 

Oil markets also rebounded as the dollar weakened on Thursday. The broad
dollar index was down 1% on the day after recent gains. Oil benchmarks often
move inversely with the dollar as most global crude transactions are handled
in dollars, so a rising greenback makes crude more expensive for big
importers.

 

“The dollar is putting a lot of pressure on commodities,” said Tim Snyder,
economist at Matador Economics in Dallas.

 

Heavy falls on European and Asian stock markets followed Wall Street’s worst
day since mid-2020, as stark warnings from some of the world’s biggest
retailers underscored just how hard inflation is biting.

 

The looming possibility of a European Union ban on Russian oil imports has
been supporting prices, however.

 

This month the EU proposed a new package of sanctions against Russia over
its invasion of Ukraine, which Moscow calls a “special military operation.”

 

That would include a total ban on oil imports in six months’ time, but the
measures have not yet been adopted, with Hungary among the most vocal
critics of the plan.

 

Russian Deputy Prime Minister Alexander Novak said on Thursday that Moscow
would send any oil rejected by European countries to Asia and other regions.

 

Novak said Russian oil production was about 1 million barrels per day (bpd)
lower in April, but had increased by 200,000 bpd to 300,000 bpd in May with
more volumes expected to be restored next month.

 

On Wednesday, the European Commission unveiled a 210 billion-euro
($220-billion) plan for Europe to end its reliance on Russian fossil fuels
by 2027, and to use the pivot away from Moscow to quicken its transition to
green energy.

 

.

 


 

INVESTORS DIARY 2022

 


Company

Event

Venue

Date & Time

 

 	

 

 

 

 

 

 	

 

 

 

 

 

 	

 

 

 

 

 

 	

 

 

 

 

 

 	

 

 

 

 

 

 	

 

 

 

 

 

 	

 

 

 

 

 

 	

Counters trading under cautionary

 

 

 

 	

 

 

 

 

 	

ART

Seed co Int.

 

 

 	

Starafrica

Medtech

Turnall

 

 	

Seed co

 

 

 

 	

 

 

 

 

 	

Invest Wisely!

Bulls n Bears 

 

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