Mar­kets ner­vous on weaker prospects

The Star Early Edition - - PRICES - Dr Chris Harmse Chief econ­o­mist Re­bal­ance Fund Man­agers

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.

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