Financial markets score huge gains
FINANCIAL markets across the globe improved strongly last week, given the successful acceptance of sanctions against North Korea.
In the US, the Dow Jones industrial index, the Standard & Poor’s 500 and the Nasdaq reached new record levels.
At the close of the JSE on Friday, the Dow Jones had gained 2.1 percent for the week, the Nikkei in Japan had increased 3.3 percent and the Dax in Germany ended the week 1.7 percent stronger.
Despite these positive movements, four negative factors weighed heavily on South Africa’s financial markets during the week. These factors were:
The negative perceptions by the grading agency Moody’s suggesting a further downgrade of SA’s sovereign debt;
The announcement by the government that it would bail out the South African Airways (SAA) with another R10 billion and the reappointment of SAA chairperson Dudu Myeni;
The disappointing lower than expected retail sales figures of only 1.8 percent in July against the revised 3.2 percent figure in June; and
Fears that the independence of the Reserve Bank is under threat.
In reaction to these factors, shares on the JSE were sold-off, especially since last Tuesday. Even the much weaker rand that normally helps rand hedgers and the blue chip shares, could not prevent the bourse moving lower.
The all share index traded 1.3 percent lower than the 56 366 points close on Tuesday. It ended Friday on 55 645.15 points.
Over the week, the all share lost 0.14 percent, the financial index traded 1 percent lower, while the resources index had decreased by 0.6 percent.
Listed property shares ended the week marginally higher by 0.3 percent, while the industrial index gained 0.4 percent.
The rand fell sharply last week. On Friday just after the close of the JSE, the rand traded at R13.16 to the dollar. This was 24c (1.9 percent) weaker than a week ago. Against the pound, the currency had lost about 80c (4.7 percent) and traded at R17.84.
Against the euro, the rand traded 20c, or 1.3 percent, weaker over the week at R15.74.