ANC in serious financial trouble, and JPMorgan CEO warns about higher interest rates

The rand is holding its ground against the dollar in early trade on Friday, 7 August. The currency is trading at R16.35 to the greenback after weakening slightly on 6 August. 

This is on the back of investors turning more risk-off as a deal between the United States and Iran remained elusive. 

Iran has also been unable to seal a deal with Oman to reopen the Strait of Hormuz, resulting in oil prices gaining 1.6% to $83.80 a barrel. 

Over the past week, oil has fallen by 5% amid hopes of an agreement to reopen the Strait and lasting peace between the United States and Iran.

Investor fears have also been stoked by Iran attacking a “hostile target” in the Strait. Trump claims the war can still end soon, saying negotiations are progressing well. 

As investors turn risk-off, emerging market assets declined as capital flows to developed safe havens such as the United States and Europe. 

Asian stocks and currencies are slightly weaker this morning. European stocks are set for a modest loss at the open after closing at an all-time high yesterday. 

Economic data from China showed a trade surplus of $112.5 billion in July, a slight narrowing from June. 

Exports rose more than expected, indicating that the global economy is holding up better than many think amid the oil shock. 

Calls for a rate hike in the United States grew into a chorus as St Lousi Fed President Alberto Musalem said the Federal Reserve should continue to exercise meaningful restraint on inflation. 

Musalem said the central bank should not tolerate above-target price pressures in anticipation of future productivity gains from AI and other technological advances.

Employment data in the United States should be released today, giving an indication of how the world’s largest economy is faring. 

It will also inform predictions about a rate hike or cut by the Federal Reserve, as its dual mandate forces it to aim for full employment alongside price stability. 

Standard Bank expects US job creation to rebound, putting further pressure on the Fed to hike rates as labour market weakness proves short-lived. 

This will inform the South African Reserve Bank’s view on inflation and interest rates, as it will look to maintain the rand’s current level against the dollar. 

Important finance and investing news

ANC in serious financial trouble: The ANC is facing a default judgment after allegedly failing to defend a high court claim. Bidvest Services is seeking to recover R900,000 for unpaid cleaning, hygiene, and pest control services at Luthuli House. [BusinessDay] 

AI chip stocks fall: Shares of investor darlings Western Digital and Sandisk fell after they reported quarterly results late on Tuesday. Investors dumped the stocks in the companies as their guidance came in below analyst estimates. Western Digital fell 13%, and Sandisk dropped 7%. [Wall Street Journal] 

Top banking CEO has a warning for the world: JPMorgan Chase CEO Jamie Dimon warned that high demand for capital to fund the AI buildout could keep inflation elevated, resulting in higher-for-longer interest rates. Huge infrastructure requirements, global deficits, and wars will add inflationary pressure and push up bond yields. Dimon also noted that leverage is “pretty high” around the world. [Yahoo Finance] 

Free lunch is over: Chinese tech giant Alibaba plans to ask major users of its next Qwen open-source AI model for a share of the revenue they make from using it. Open source is commonly thought of as free, but as demand ramps up, companies are beginning to look for ways to generate revenue from it. Other Chinese AI labs require any user generating more than $20 million in sales to secure a commercial agreement with the lab. [Reuters/Yahoo Finance]

Parliament to investigate PIC: SCOPA chairperson Songezo Zibi said the committee will consider conducting an inquiry into maladministration and mismanagement at the PIC. The asset manager is the largest in Africa, sitting on R3.5 trillion in assets, largely from the Government Employees Pension Fund. [EWN]