Local markets closed softer as investors chose investments in developed markets instead of emerging markets
Investments in developed markets
The JSE all-share index (ALSI) closed 0.54% lower, with the financial sector losing 2.05%, followed by the resources sector with a loss of 0.94%. Industrial counters closed 0.25% stronger supported by a weaker rand.
Developed market equities rose in the past week, underpinned by better than expected earnings reports, particularly in the United States. Local markets closed softer as investors chose investments in developed markets instead of emerging markets. The JSE all-share index (ALSI) closed 0.54% lower, with the financial sector losing 2.05%, followed by the resources sector with a loss of 0.94%. Industrial counters closed 0.25% stronger supported by a weaker rand.
The SA currency weakened to around R14.30 against the USD, mainly on dollar strength as positive economic data flowed from the US. Although economists expected the US economy to grow around 2.2% in the first quarter of the year, data released by the US Department of Commerce on Friday showed that growth accelerated to a 3.2% annual rate, up from the 2.2% pace of the final quarter of 2018. Rising inventories and improved foreign trade were contributors to growth, while consumer and business spending were disappointing.
The Trump administration announced last week that the State Department would cease granting sanctions waivers to any country still importing oil from Iran, after 2 May. This will force countries, including South Africa, to stop buying oil from Iran. The impact of the announcement was that the price of Brent crude jumped by 3.25% to around $75 per barrel. This decision, coupled with the weaker rand-dollar exchange rate, forced the SA Department of Energy to announce a petrol price increase of 54 cents per litre for 93 and 95 unleaded, for the month of May.
With only a week and a half to go to the country’s national elections, populistic rhetoric will probably go into overdrive. Although it is widely expected that economic activity will increase in the aftermath of the elections, the business and investment community is usually somewhat sceptic given the many uncertainties involved in elections.
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