South African financial markets recovered last week after a volatile and uncertain previous week due to the Middle East crisis and worries on the Chinese economy.

The Brent oil price came down again by more than $8 per barrel to $72.85 (R1282) per barrel on Friday evening. Gold as a haven for investors is shining as the gold price reached $2 700 per ounce for the first time on Friday and traded at the market close on $2 716 per ounce. Platinum once again trades above the $ 1000 per ounce level.

These turnarounds in market sentiment contributed to the Rand moving stronger on Friday, after it reached its weakest level in more than a month on R17.76 to the dollar on Thursday. The currency ended the week stronger at R17.57 to the dollar. The stronger rand and lower oil price also contributed that the petrol prices may not be increased as was feared earlier last week.

South African financial markets and investors now await the release on the CPI inflation rate data by Statistics South Africa. It is expected that the inflation rate will come down in September to 4.3%, from 4.4% in August and below the midpoint target of 4.5%. Optimism still prevails that the Monetary Policy Committee (MPC) will lower its repo rate by at least 0.25% at their next meeting starting on November 21.

On the JSE equity prices recovered strongly last week. The All Share index increased by 2.12% over the last seven trading days and ended last week above the 87 000 point level (87 201). This is only 300 points away from its record level, as the index gained 20.31% over the last year. The All Share Industrial Index was flat last week but gained 19.07% over the past six months.

On the Financial board, the FIN5 index increased by 2.8% and trades 31.48% higher than a year ago. This index reacted much more positively with the better-than-expected retail sales data that were announced by StatsSA last Wednesday. Buying appetite at retail shops increased for six consecutive months in August as total retail sales numbers increased by 3.2% over a year ago following a downwardly revised 1.7% increase in the prior month. The Resources 10 index last week soared by 7.0%.

In the US risk assets like equities also rebounded last year after the better-than-expected rise in US retail sales, suggesting that a US recession is not on the cards soon. Sales at the retail desks in the US increased 0.4% month-over-month in September 2024. This is higher than the 0.1% gain in August. Markets expected an increase of a 0.3% rise.

Analysts still are of the opinion that the Federal Reserve may cut its bank rate twice before the end of year. The Fed’s next meetings will be on November 6-7 and December 17-18 . On Wall Street the Dow Jones Industrial index gained 0.9% over the last five days, the S&P500 increased by 0.85% and the tech-heavy Nasdaq index traded -0.5% down.

This coming week South Africa awaits the release of the September consumer price index inflation rate numbers. The expected 4.4%, remains lower than the MPC’s midpoint target of 4.5%. This will boost chances for another 0.25 repo rate cut in November. On global markets, the weekly data on oil and gas reserves in the US, as well as US weekly jobless claims numbers will be of importance. On Friday, the release of US durable orders for September will be of high interest.

Chris Harmse is the consulting economist of Sequoia Capital Management and a senior lecturer at Stadio Higher Education.

BUSINESS REPORT