Volatility is the order of the day on local markets

SOUTH African financial markets are experiencing volatility and uncertainty.

The rand and bond rates remain under pressure. Equities, however, remain bullish.

Bond rates in the US and Europe continue to move weaker in anticipation of inflationary pressure and possible interest rate hikes.

The stronger than expected jobs report in the US on Friday pushed the 10-year-treasury yield above 1.6 percent. The US Labour Department announced that non-farm payrolls jumped 379 000 during February, as the unemployment rate fell to 6.2 percent. Expectations were that only 210 000 new jobs were added and that the unemployment rate would stayed on the January level of 6.3 percent.

Equities on Wall Street, however, rebounded sharply on Friday, with the Dow Jones industrial index opening more than 300 points higher, while both the S&P 500 and Nasdaq opened 1 percent higher.

Stocks that will benefit from a rapid economic comeback gained in the wake of the jobs report will mostly be banks and retailers. Energy stocks like Occidental Petroleum jumped by more than 3 percent. The higher bond rates again have led to a sell-off of tech shares with high valuations like Tesla and Peloton.

This sudden rebound of shares on Friday in the US followed a day of uncertainty and negative sentiment on remarks made by the Federal Reserve chairperson Jerome Powell’s on rising treasury rates. He said although the sudden jump in bond rates caught his attention, the Fed remained neutral on any possible steps to be taken to counter rising treasury rates by adjusting the Fed’s asset purchase programme.

South African shares, bond rates and the rand followed these volatile US and global movements last week. On Thursday evening the rand lost more than 45 cents against the dollar, and shares lost more than 1.5 percent.

Bond rates last week increased sharply with the R187 shorter duration government security up from 7.33 percent to 7.58 percent at the close on Friday. This was the third consecutive week that bond rates increased sharply. The R187 had shot up by 12.8 percent since February 5 when the treasury traded at 6.66 percent.

The US jobs data, sharp increase in US futures on Friday morning and afternoon, as well as the strong opening on Wall Street, boosted shares on the

JSE. This helped most indices to end the week much stronger than the previous Friday and near new record high levels.

The all share index recovered strongly, up by 2.33 points last week to 68 271 points, after it had dropped by 2 percent the previous week. This is the highest Friday close on record.

Industrials recovered by 1.7 percent, after a slump of 4.4 percent the previous week. The Resource 10 index increased by 4.6 percent, financials also recovered as the Fin15 advanced by 4.6 percent. Listed property shares maintained their winning streak as the index also closed on a new high for the year, up 3.2 percent and has now gained 7.4 percent year to date.

Gold and platinum prices continued to drop. The gold price closed Friday on $1 700 (about R25 718) or $39 dollar an ounce down from the previous week. Platinum lost $56 last week to $1 129.

This week all eyes will be on the release of South Africa’s long awaited GDP economic growth rate for the fourth quarter of last year. It is expected that StatsSA will announce that the yearon-year growth rate was 4.8 percent (6 percent in the thrid quarter), the quarter-on-quarter rate to be 3.7 percent and the growth rate for the whole of 2020 around -7 percent.

On Wednesday, the Reserve Bank will publish its quarterly bulletin for March with the current account numbers being of paramount importance. StatsSA will also publish the latest mining and manufacturing production numbers for January.

Globally most developed markets will announce their latest inflation numbers.