Markets nervous on weaker prospects
FINANCIAL markets globally, as well as locally, moved nervously last week as global economic prospects started to dim.
Although the World Bank reported in its June Global Economic Prospects report that world growth would accelerate to 2.7 percent this year, the world economy faces a number of downward risks. According to the report, such risks include “increased protectionism, heightened policy uncertainty, the possibility of financial market turbulence, and, over the longer run, weaker potential growth”, financial markets across the board reacted mostly nervous on the report and investors tended to sell off shares and bonds.
The Dow Jones industrial index lost more than 0.5 percent at the beginning of the week, while European share markets in particular, traded negatively. The Dax in Germany lost 3.2 percent over the week, while the FTSE 100 in London fell 1.3 percent.
Commodity prices had a mixed week, moving mostly volatile. The Brent oil price, however, recovered strongly and increased by more than $2 (R25) a barrel over the week and traded $47.61 on Friday just after the close of the JSE. Share prices on the JSE, however, moved quite negatively during the month of June.
The rand depreciated against most major currencies last week, as uncertainty on further state capture reports and negative perceptions on the ANC policy conference in Soweto made foreign investors jittery. A sell-off of bonds especially, saw bond rates deteriorating.
On Friday afternoon, the rand traded 17c weaker against the dollar at R13.09 compared with the previous Friday. Against the British pound, the rand lost more than 50c over the week and depreciated 3.2 percent and traded at R16.93 at the close.
Against the euro, the rand depreciated by 45c over the week to trade at R14.92 on Friday evening.
Although the all share index on the JSE gained 108 points, or 0.2 percent, last week, the index was down 3.6 percent for the month of June.
Over the week, the industrial index lost 0.8 percent and traded 4.4 percent lower than a month ago. Financials also struggled, gaining just 0.2 percent last week.