Rand shows mus­cle — rate hike fades

Sunday Times - - OPIN­ION - AN­DRIES MAHLANGU

THE rand perked up on Fri­day af­ter the dis­ap­point­ing US jobs re­port knocked the dol­lar and brought into ques­tion the US growth mo­men­tum.

The US cre­ated 138 000 jobs in May, be­low fore­casts of 182 000. The fig­ures were weaker com­pared with down­wardly re­vised job fig­ures of 174 000 in April.

The rand strength­ened to R12.77/$, from R12.96/$, as mar­kets tem­pered ex­pec­ta­tions of in­ter­est-rate increases in the US later this year.

Mar­kets were ex­pect­ing at least two more rate hikes from the US Fed­eral Re­serve, which ear­lier this year in­creased the re­pur­chase rate by 25 ba­sis points.

“Over­all, the lat­est em­ploy­ment re­port is a lit­tle dis­ap­point­ment, es­pe­cially the down­ward re­vi­sions to prior months, the stag­nant growth in wages, and the struc­turally low par­tic­i­pa­tion rate,” said Stan­lib econ­o­mist Kevin Lings.

The JSE All-Share in­dex ended rel­a­tively flat on Fri­day, but was off 2% to 52 889.70 points on the week, dur­ing which min­ing shares, in­dus­tri­als, as well as fi­nan­cials fell sharply be­fore sta­bil­is­ing by Fri­day.

Min­ing shares reeled from a re­newed drop in com­mod­ity prices, rang­ing from iron to Brent crude that hov­ered around $49 a bar­rel late on Fri­day.

Stock losses ran into dou­ble dig­its for a range of min­ing stocks, in­clud­ing Lon­min (down 16%), Har­mony Gold (13%) and As­sore (11%). The rel­a­tively stronger rand mag­ni­fied the moves.

Big in­dus­trial stocks also came off the boil, partly on ac­count of a firmer cur­rency and some profit tak­ing in se­lect stocks such as Naspers.

Mr Price stood out as the best per­former on the week (up 6.5%) af­ter the re­tailer raised its div­i­dend even as it re­ported a first drop in its an­nual profit in 16 years.

S&P Global Rat­ings’ de­ci­sion to keep South Africa’s sov­er­eign credit rat­ing un­changed late on Fri­day af­ter the mar­ket close would be likely to pro­vide a tail­wind for sec­tors such as banks this week.

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