Rand remains under pressure while equities continue to do fairly well

THE RAND LAST week remained under pressure due to geopolitical issues and concerns that the US Federal Reserve (Fed) would increase interest rates further next month.

Due to higher prices for commodities and the effect on double listed shares (like Naspers), that gained from the weaker rand, equity prices on the JSE ended the week once again positive.

The rand depreciated 40 cents against the dollar over the past five days to close on Friday at R19.40 to the dollar.

On the JSE, the All Share index gained 1.53% over the past seven trading days and is still 6.32% higher for the year-to-date.

The Industrial 25 index increased by 2.03% over the past seven trading days and improved by more than 20% since the beginning of the year.

International journalists, now not only concentrate on the saga around the possible sales of weapons by South Africa to Russia, but also on other issues of maladministration and corruption in South Africa, like cable theft, sabotage at Eskom, elevated levels of unemployment, among other isuues.

UK-broadcaster BBC last Thursday reported: “With stage 8 load shedding expected this winter, consumers will have up to 16 hours of no electricity every single day.

“Stage 8 power cuts would require up to 8 000MW to be shed from the national grid. This is likely to cause more businesses to shut down, further job losses and a high possibility of civil unrest.”

US newspaper, The New York Times last week on Wednesday reported: “South Africa’s largest city is now on its sixth mayor in 22 months. While politicians argue over power, residents struggle with dry taps, heaps of garbage and dilapidated buildings.”

In the US, stocks moved nervously and were volatile amid a sell-off in bank shares, as well negative sentiment on the concern that US lawmakers are struggling to reach a deal to prevent a default on US debt.

Traders are also indifferent on a US Federal Reserve rate hike in June as chairperson Jerome Powell in his speech last week hinted that a pause was near.

The Dow Jones ended the week marginally higher by 0.3% and has now only gained 0.8% since the beginning of the year.

The S&P500 ended the week positive, gaining 1.58% on the possibility of a pause in US interest rates. The index is 9.5% up for the year-to-date and supports the Fed’s opinion that the US may not move into a recession.

This week local investors and analysts await the release of the consumer inflation rate (CPI) for April 2023 by Statistics SA (StatsSA)

It is expected that the increase in the CPI was 7.1%, the same as the March 2023 figure. If the rate is higher, a further hike in the repo rate by the SA Reserve Bank’s Monetary Policy Committee at their meeting that starts tomorrow becomes a strong possibility.

StatsSA will also release the latest producer price inflation on Thursday. It is expected that prices at the factory gate increased in April at a lower rate of 10.2% against the rate of 10.6% recorded for March 2023.

On international markets, the US Federal Reserve’s Federal Open Market Committee will on Thursday release minutes of the previous meeting.

The US will announce the second estimate of its economic growth rate for the first quarter of 2023.