US fundamentals and global policies dominant
US ECONOMIC indicators and the two major meetings involving the US, Korea and China overshadowed financial markets and the movement of exchange rates last week.
US stocks retreated for three consecutive days at the beginning of last week, as lingering concerns over trade and geopolitical risks offset a report showing the economy cooled by less than expected last quarter.
It was announced on Thursday that US gross domestic product growth recorded an upward rate of 2.6 percent during the fourth quarter of 2018.
In reaction the dollar climbed and Treasury yields increased.
Equities started to rebound again from last Thursday after the White House’s economic adviser Larry Kudlow and Treasury Secretary Steven Mnuchin gave optimistic outlooks on the status of trade negotiations with China.
On Friday afternoon the S&P500 had traded 0.4 percent higher, which was about 1 percent higher than a week ago. Despite disappointing manufacturing data out of China and the abrupt end to the US-North Korea summit led to a litany of concerns facing investors, share prices in Europe and East Asia ended last week strongly.
The weaker rand took its toll on financial and listed property shares last week. Uncertainty over the US-China trade talks, the weaker currency and negative sentiment on Eskom around possible load shedding this week all impacted negatively on share prices.
The all share index improved only slightly by 211 points, or 0.4 percent last week. The resources 10 index lost 0.4 percent, financials were down 0.6 percent and property struggled, weakening by 2.2 percent.
Given the weight of rand hedgers, industrials were higher by 1.1 percent due to the weaker currency.
In view of a stronger dollar and pound and uncertainty over the US-China trade situation, the rand exchange rate came under pressure last week. The currency had depreciated by 25 cents (1.8 percent) against the dollar, trading at R14.20 on Friday afternoon.
Against the pound, the rand had lost 57c, or 3.12 percent, on R18.80 and had traded 35c weaker, or 2.2 percent against the euro at R16.17.
This week investors will look out for the release of South-Africa’s GDP economic growth rate for the fourth quarter of last year, on Wednesday.
The latest Sacci Business confidence index and the level of foreign reserves will also be announced.
Globally attention will shift to the latest jobs data for various developed economies, especially those of the US.
Most developing countries will release their latest Purchasers Managers Indices, inflation rate data and retail sales. The EU, France and Australia will also release their GDP growth rates for the fourth quarter.
The higher average oil price and the weaker rand continue to put upward pressure on fuel prices. By Thursday last week the price for petrol was under recovered by 75c a litre and diesel by 91c a litre. These under-recovered levels are despite the fuel levy of 20c a litre that will be introduced on April 3 and a further carbon tax of 9c a litre on petrol and 10c a litre on diesel with effect from June 5.