US future policy fears weigh on markets
DOMESTIC financial markets moved weaker at the end of last week on fears of the effects of future economic policies by the Trump administration, as well as higher-than-expected US interest rates.
Fears of a different stance towards US – Africa trade relations under the Trump administration – also moved investors to be cautious towards South African assets.
Despite the better-than-expected domestic retail sales growth of 3.5 percent in November and the annual inflation rate of 6.4 percent, which was in line with expectations, financial assets could not keep its momentum of the previous two weeks.
Share prices on the JSE ended the week lower. The all share index traded down by 263 points (0.5 percent) for the week. Financial shares moved down by 537 points (1.3 percent), while the industrial sector lost 0.4 percent. The resource 20 index traded slightly higher by 0.2 percent. The property share index lost 1.1 percent, and the R186 bond increased by 10 points or 1.15 percent.
Better-than-expected US economic data throughout the week points towards sooner than later US interest rates hikes and therefore a much stronger dollar.
Among the US data released last week, the four-week average jobless claims came in the lowest in 43 years, with higher-than-expected increases in US house prices.
US stocks moved weaker in reaction as investors became more cautious and stayed on the sideline before the Trump swearing in ceremony later on Friday.
Trump’s promises on tax and regulatory reforms and higher infrastructure spending contributed to a surge in share prices on Wall Street since his winning of the election.
The rand moved sideways against the dollar last week in anticipation of the Trump speech. The currency traded 4 cents (0.3 percent) stronger against the dollar at R13.52 at the close of the JSE on Friday.
Against the pound, the rand depreciated by 24c (0.7 percent) to R16.62 and by 6c (0.4 percent) against the euro at R14.42 for the week.
Investor’s attention will be on the Monetary Policy Committee’s interest rate decision, as well as the release of economic growth data of the US and the UK.