Global Markets & Petrol

Global Markets and Petrol

Some good news for South Africans is that the producer price inflation (PPI) slowed slightly to 5.1% year-on-year in January compared to 5.2% in December, according to data published by Statistics South Africa. This is a leading indicator of lower inflation to follow.

Over the past week global markets sold down sharply following news on monetary policy out of the United States. New Federal Reserve Chairman Jerome Powell made his first public appearance since taking office by testifying before the House of Representative’s financial services committees on monetary policy. Markets interpreted Powell’s view on the economy as a sign that the Fed may hike its policy rates four times in 2018, rather than the three hikes forecast by Federal Open Market Committee members at their December meeting.

US president Donald Trump said on Thursday that he would approve new tariffs on imports of steel and aluminium. His administration will impose 25% duties on imported steel and 10% duties on aluminium. Investors fear US protectionist measures could result in retaliation from trading partners.

Locally, the JSE all-share index (ALSI) closed the week 1.64% lower, with the industrial index the biggest loser, closing 2.21% down, followed by the resources sector with a loss of 1.40%, and the financial sector recording a loss of 0.95%.

In Europe, the Dow lost 4.45%, followed by the CAC 40 with a loss of 3.40%, while the FTSE in London closed 2.41% lower.

In the US, the S&P 500 closed 2.04% lower. Asian markets followed the downward trend, with the Nikkei recording a loss of 3.25% and the Shanghai composite index closing 1.05% in the red.

Some good news for South Africans is that the producer price inflation (PPI) slowed slightly to 5.1% year-on-year in January compared to 5.2% in December, according to data published by Statistics South Africa. This is a leading indicator of lower inflation to follow.

Fuel prices may drop by as much as 38c per litre in March, according to the Automobile Association, following a stronger rand and lower oil prices. This should help absorb the 42c per litre tax hike to follow in April.

The rand lost some ground against the dollar on the back of dollar strength and in line with global currencies, following the Fed Chair’s comments on monetary policy. The rand traded around R11.98 against the USD.

It is expected that market volatility will increase in the coming months and investors should brace themselves for a bumpy ride. However, the overall outlook remains positive.

Regards

Johan Steyn

Regards,

SECURITAS – Wealth Management