Financial markets nervous and flat

FINANCIAL markets across the globe moved sideways last week in the light of the North Korea saga, as well as the dampened sentiment of expected increases in US interest rates that was announced by the Federal Reserve last Wednesday.

The Dow Jones industrial index, as well as the Standard & Poor’s 500 on Wall Street nevertheless recorded record high levels for most of last week.

Locally, the “unexpected” announcement by the monetary policy committee of the Reserve Bank that it would keep the repo rate unchanged on 6.75 percent, contributed to further uncertainty and nervousness on financial markets.

Governor Lesetja Kganyago stressed in his press release that “The rand remains a key upside risk to the inflation outlook. Furthermore, some of the event risks, particularly those of a political nature, are now more imminent but with no greater degree of clarity regarding the outcome. The prospect of a further ratings downgrade persists, particularly given the increased fiscal challenges and political uncertainty.”

In reaction to these uncertainties and downside risks, the all share index on the JSE traded mostly sideways last week and gained only 194 points, or 0.3 percent, over the week to close at 55 839.73 points.

The financial index, due to a stable rand, gained 1.3 percent, while the resources index had decreased by 0.6 percent.

Listed property shares continued their recovery and ended the week higher by 1.1 percent. This index has now increased more than 13 percent (total returns) since the beginning of the year.

Industrial shares also traded sideways and ended 0.3 percent higher.

The rand traded in a narrow band last week.

On Friday afternoon just after the close of the JSE, the rand traded at R13.22 to the dollar. This is only 6c (0.3 percent) weaker than a week ago.

Against the pound, the currency stabilised on R17.84.

Against the euro, the local unit also traded marginally weaker over the week, down 20c, or 1.3 percent, at R15.74.