Opinion: Although share indices over the world continued to feel some pressure, South African financial markets remain strong. Share prices ended last week mostly higher than the previous Friday.
ALTHOUGH share indices over the world continued to feel some pressure, South African financial markets remain strong. Share prices ended last week mostly higher than the previous Friday.
The all-share index on the JSE ended the week 2.4% higher and remains positive since the beginning of the year increasing by 2% year to date. Industrial shares gained last week almost 3% (2.9%), the Resources 10 index was up by 2.2%, Financials traded higher by 1.7%, and listed property by 0.4%.
Given the better-than-expected US non-farm payrolls for January that were released after the JSE-close on Friday, the JSE Top40 futures closed 0.25% higher on Friday evening, suggesting a strong opening this morning.
The rand, although volatile, appreciated by 10 cents against the dollar last week (R15.48/$) and is trading 50 cents lower than the R15.98/$ at the beginning of the year. On the capital market, the R186 bond ended Friday on 7.66%. This is 19 points, or 1.1%, stronger than on December 31 last year.
These stable, but stronger financial markets remain positive despite the ongoing geopolitical unrest in Ukraine, inflation fears, weaker US and UK retail sales, manufacturing data, as well as the Chinese economy that remains under pressure as the property market is in dire straits.
The International Monetary Fund in its latest Global Economic Update for January this year reports that: “The global economy enters 2022 in a weaker position than previously expected. As the new Omicron Covid-19 variant spreads, countries have reimposed mobility restrictions. Rising energy prices and supply disruptions have resulted in higher and more broad-based inflation than anticipated, notably in the United States and many emerging market and developing economies.”
Fears for interest rate hikes by most developed markets (DMs) put equity prices in the US, the UK and the EU under pressure the previous week. Share prices on global markets, however, recovered last week as they discounted better non-farm payrolls on Friday, and Amazon’s record high jump in earnings of $191 billion (R2.9 trillion).
The US economy added 467,000 new jobs to the economy in January. This is much more than the expected 150,000 jobs increase. The US unemployment rate in January was 4% and back to pre-Covid-19 levels. As a result, share prices on Wall Street ended the week strongly. Especially tech stocks on the Nasdaq board had a good week and recovered 2.4% of its losses of more than 10% during January this year. The Dow Jones industrial index ended the week 1% higher and the S&P500 index had increased by 1.5%.
In the UK, the FTSE 100 ended Friday 0.13% down for the day, but is still up for the year by 1.79%. The German DAX on Friday traded 5.7% down for the year, and the CAC in Paris already lost 3.7% from December 31.
This week, all eyes will be on the State of the Nation address by President Cyril Ramaphosa on Thursday. Sacci’s Business Confidence Index for January will be released on Tuesday, and StatsSA will publish the latest manufacturing and mining production data on Thursday.
In global markets, inflation expectations and the release of the US inflation rate for January on Thursday will lead market and investment sentiment for the week. Expectations are that the increase in the US CPI (Inflation rate) will exceed the 7% mark recorded in December, and may be as high as 7.3%. US crude oil and gas stocks at the end of February 4 to be announced on Wednesday will also bear on oil prices and market sentiment. Also of importance will be the release of the UK gross domestic product growth rate for fourth quarter and for the whole of last year on Friday.
* Dr Chris Harmse is an economist at CH Economics.
– BUSINESS REPORT
