The Johannesburg Stock Exchange fell to its lowest in a month yesterday and the rand remained volatile amidst the wait-and-see approach by investors in anticipation for significant economic releases from major economies and awaited additional corporate results throughout the week.
Envisioning an escape from a deeper or more prolonged recession, investors may still grapple with a moderation in global economic activity in 2024, driven by the ongoing repercussions of tight monetary policies, constrained government coffers, lingering inflation and unpredictable geopolitical events.
The JSE All Share index fell by 0.9% to 73 575 points, its lowest since 12 December 2023, mainly pressured by financials and miners, in spite of the gold price rising for the third straight day.
Gold rose above $2 050 an ounce yesterday as escalating tensions in the Middle East drove safe-haven demand for the metals, while a surprise decline in US producer inflation data bolstered bets for an early interest rate cut from the Federal Reserve.
In spite of this, FirstRand and Sibanye-Stillwater fell 4.1%, leading the losses suffered by the local bourse.
Domestically, retail sales data and mining figures due later in the week will be closely watched for a more complete picture of South Africa’s performance in the fourth quarter.
The spotlight was also focused on speeches delivered by various entities and global leaders during the annual World Economic Forum, which kicked off yesterday in Davos.
Meanwhile, the rand retreated by 0.4% to R18.70 against the US dollar yesterday but the greenback was also subdued as most investors were away for the Martin Luther King Day holiday.
Investec chief economist Annabel Bishop said lower global financial risk-aversion around the turn of the year tended to see the rand experience lower volatility, and usually some strength, although this year the domestic currency had remained weak on poor fundamentals.
Bishop also said because of the government’s low support for new mines in South Africa and other economic growth drivers, investor sentiment was weak and this has translated through in the rand failing to make traditional gains early this year.
“The rand continues to see low volatility this year to date, but is in a typically more supportive seasonal period, and still remains at risk of greater volatility as market moving data and events are quiet currently,” Bishop said.
“The rand remains among the worst performing emerging markets currencies year-on-year, with US data releases key for the domestic currency, and the movements in the US dollar itself. The rand remains weak against the major crosses as well.”
