Early signs economic recovery is under way
MOST FINANCIAL markets started to recover last week, with far less volatility and uncertainty unlike the previous few weeks.
A possible working ceasefire agreement between Ukraine and Russia contributes to “normalisation” of equity, bond, and foreign exchange markets.
Attempts by the US to recover oil supply in the light of sanctions against Russia saw a sharp decrease in global oil prices.
Brent oil traded on Friday afternoon at $107 (about R1 565), against $117 the previous week.
The weaker oil price and higher demand for more risky assets like shares, pushed other commodity prices down. Gold lost $48 during the week, trading at $1 923 an ounce, and platinum closed $28 lower for the week at $986 an ounce.
The strong movement towards gold as a safe haven, as well as the reaction on South Africa increasing interest rates the previous week, saw the rand appreciate strongly over the past two weeks.
The currency traded at one stage at levels stronger than R14.47 to the dollar at the beginning of last week. It, however, lost ground again since last Thursday and at the end on Friday, traded weaker on R14.65, little changed from the previous week’s close.
In the US, equity markets recovered for the third consecutive week. The Dow Jones industrial average index is now only 4.2 percent down for the year, whereas at the end of February the index was down 8.3 percent since the beginning of the year.
The S&P 500 gained 5.4 percent during March, and is now 4.6 percent down for the year against 10 percent a month ago.
The increase in US non-farm payrolls by 431 000 jobs during March also increased positive sentiment, as it shows that the supply side of the US economy is picking up.
The mixed economic developments last week, namely the shocking figure released by StatsSA that South Africa’s unemployment rate deteriorated further to 35.3 percent during the fourth quarter of 2021 against 34.9 percent in the previous quarter, and the announcement by the Minister of Finance last Thursday that the government would lower the fuel levy by R1.50 a litre in April, led to some nervousness on equity and bond markets. But overall, financial markets ended the week and especially the quarter, much stronger.
On the JSE, theall share index closed on Friday on 75 907, or 2.2 percent, up on the previous Friday. The index gained 2.4 percent during the first quarter of the year, and mostly contributed towards strong returns on domestic equity and balanced portfolios since the beginning of the year.
The financial sector continues to recover strongly as the Financial 15 index closed the week 3.6 percent higher than the previous Friday, and gained a massive 19.5 percent in the first quarter.
Despite weaker commodity prices last week, the Resources 10 index closed the week 0.3 percent higher and gained 15.9 percent during the first quarter of 2022.
Industrial shares continue their see-saw movements, closing Friday marginally higher by 0.1 percent, but remains 14.7 percent down for the first quarter of the year.
Listed property shares recovered their losses of the previous few weeks, and traded on Friday 0.6 percent higher. This sector, however, remains under pressure and has lost 2.2 percent since the beginning of the year.
This week, S&P Global Purchasing Managers Index (PMI) for March is set to be released.
South Africa’s level of foreign reserves is to be announced by the Reserve Bank on Thursday.
Sacci will release its latest business confidence index value on Friday.
On the global markets, the various PMIs for most countries are set to be released. The US and Canada are due to publish their balance of trade numbers for February.
The release of the Federal Reserve’s Federal Open Market Committee meeting minutes of last month also on Wednesday is expected to draw the most attention this week.