Global geopolitical factors fuel volatility

GLOBAL geopolitical factors caused uncertainty, volatility and big sell-offs on the South African markets.

In tandem with these movements, the rand, although somewhat stronger, stayed vulnerable and volatile in line with most other emerging market currencies.

The cancelation of the US-North Korea summit scheduled for next month, the ongoing war in the Gaza strip, as well as the contagious effects of the Turkish political and currency crisis, were mostly the reasons for the downward and volatile movement in share prices on the JSE.

A sharp increase in the inflation rate from 3.8 percent in March to 4.5 percent in April was as expected.

Given the anticipated increases in electricity prices above the inflation rate, higher wages and further fuel price hikes that are unavoidable, the upside risk for higher inflation rates above 5 percent increases. Consequently, the Monetary Policy Committee (MPC) did to change the repo rate of 6.5 percent at its meeting last week.

US stocks during last week bounced between gains and losses a few times. At the close of the JSE on Friday afternoon, the Dow Jones industrial average traded on 24 781 points, just 0.3 percent higher than the previous Friday

At the close on Friday, the all share index traded on 56 916 points. This was 1.5 percent lower than the previous week. The index is now trading 2.4 percent lower than at the start of the month and is down by 4.3 percent since the beginning of the year.

Listed property shares also continued to decline. The index lost 0.7 percent last week and is now 21 percent lower since the end of December. Bond rates increased last week with R186 Government bond trading on 8.45 percent.

The rand started last week on the back foot as it tested the R12.80 to the dollar level. It managed to move stronger over the later part of the week, trading at R12.51 at 5pm, compared with R12.73 the previous Friday.

Meanwhile, the under-recovering levels of fuel prices since the last announcement on petrol and diesel prices on April 25 are still worrying. By Thursday, diesel was under-recovered by 87 cents a litre and petrol by 83c.