South African markets traded in the red yesterday due to steep losses from the financial heavyweights, while the country’s economic growth prospects shrank further on heightened power cuts.
The JSE All Share index was slightly down by 0.3% to around 77 788 points after two consecutive sessions of gains, before gaining to touch 78 000 points later in the afternoon. It later closed at 77 740.69 points.
The JSE in intraday trade was weighed down by losses in Old Mutual and Nedbank, as Old Mutual’s share price was 6% down to R11.11 per share while Nedbank fell 4% to R241.81 per share.
Investors were focused on the US inflation data and Federal Open Market Committee minutes, which could provide crucial guidance on the monetary policy trajectory of the Federal Reserve.
The annual inflation rate in the US is expected to have slowed for a ninth consecutive period to 5.2% in March, the lowest since May 2021 from 6% in February, brought down by lower cost of energy and food.
With the US economy looking more resilient than many had anticipated, the recent turmoil in the banking sector has added fuel to the debate on whether there is going to be a soft landing or a recession.
Meanwhile, the rand weakened 0.3% to R18.44 to the US dollar yesterday, after closing R18.37/$1 on Tuesday, dragged by the International Monetary Fund (IMF) lowering South Africa’s growth forecasts and heightened load shedding.
TreasuryONE currency strategist André Cilliers said the rand had lost some ground it had made on Tuesday
“We expect the rand to remain range-bound in the run-up to the inflation data and track the dollar's moves against the euro and pound,” Cilliers said.
“There was some bad news for the local market, with the IMF lowering its 2023 growth forecast for South Africa to 0.1% from the previous 1.2%.”
The International Monetary Fund (IMF) on Tuesday trimmed its global-growth projections, saying global growth would remain at around 3% for the next five years, its lowest medium-term growth forecast since 1990, and well below the average growth of 3.8% seen in the past two decades.
However, South Africa saw the largest reduction among major economies as it was forecast to grow just 0.1%, down 1.1 percentage point from the previous estimate.
To add salt to the wound, Eskom yesterday announced indefinite Stage 6 load shedding due to higher-than-anticipated demand.
The country has experienced near-permanent load shedding since September 2022, only breaking from the blackouts for three days.
Investec chief economist Annabel Bishop said the rand had traded weaker in increasingly risk-averse markets.
Bishop said a year ago global financial markets turned markedly risk-averse after Easter, with the past 12 months having seen the rand weaken from R14.50 against the dollar to R18.81.
“The rand has weakened against the crosses, reflecting continued strong risk-off sentiment in global financial markets, while data has disappointed recently from China and the risk of US recession is seen as rising again,” Bishop said.
“Thin trading conditions around Easter have exacerbated the negative impact of bad news on the domestic currency, with a number of negative factors afflicting the rand last week.”
BUSINESS REPORT