•Šƒ”‡• ˆƒŽŽ Financial markets remain under pressure
J- South African financial markets remain under severe pressure since the beginning of the year. Part of this is due to the South African economy experiencing a perfect storm.
Economic growth hovers just above a recession as the gross domestic product (GDP) in real terms recorded only a 0.1 per cent increase in quarter four of 2023.
The inflation rate started to increase towards the six per cent upper target of the SA Reserve Bank’s Monetary Policy Committee (MPC) and the rand remains under pressure.
Electricity
Fuel prices are increasing due to higher global crude oil prices and electricity tariffs will increase by 12.3 per cent from July 1. In the middle of this storm, interest rates remain high with little prospects of decreasing before the second part of the year.
The All Share Index total return index lost 2.2 per cent since the beginning of the year and only improved marginally by 1.5 per cent over the past year. Listed property seems to recover, gaining 8.6 per cent since March 2023, while bonds just beat the inflation rate over the past 12 months (5.5 per cent), and due to this, the weaker Rand suffers to obtain positive returns, since the beginning of the year.
On global markets the sticky high US core inflation, strong employment, and US retail sales, contribute to expectations that Federal Reserve Open Market Committee (FOMC) will only start to decrease interest rates during the second part of 2024.
The better-than-expected growth in the US economy of 3.4 per cent in quarter four 2023, supported by consumer spending and non-residential business investments boosted the strong US GDP growth.
Jobs
The job report for March, which was published on Friday, was much more than expected. The US economy created a robust 303 000 in March and the jobless rate dipped to 3.8 per cent, extending a historic streak of unemployment below 4 per cent. Markets expected 200 000 new employment opportunities and the unemployment rate to remain on 3.9 per cent.
In reaction US share indices recorded a strong recovery on Friday, after a sharp decline earlier in the week.
The Dow Jones Industrial Index recovered by 0.8 per cent after the release of the job report but still ended the week down by 2.27 per cent, gaining 3.15 per cent since the beginning of the year and had increased by 16.18 per cent over the last year.
Recovered
The S&P500 Index lost 1.02 per cent last week, but also recovered on Friday by 1.2 per cent.
The index is now 9.3 per cent up for the year-to-date and a 26.8 per cent over the past year.
Given the bullish sentiment in precious metals, with the gold price hitting a record high of US$2330 (R43 640) on Friday, the Rand, despite the better-than-expected US job numbers appreciated strongly last week.
The currency appreciated from R18.85 to the Dollar last week Monday to R18.68 on Friday. On the JSE share prices remain bearish. The All Share index ended the week flat gaining 0.32 per cent.