Markets weaker, nervous on Fed talk

Cape Town - Shares markets moved weaker and nervous last week after the US Federal Reserve hinted that it would possibly increase interest rates at its next meeting next month.

A technical downward movement in the oil price last Thursday caused overnight panic and hedge fund oil traders dived into long positions. This caused oil prices to drop sharply. At the close of the JSE on Friday, Brent oil traded at $49 (R662) a barrel, more than $3 lower than at the beginning of last week. The lower oil price also had a negative effect on other commodity prices, especially gold, which and fell sharply.

On the local front, the purchasing managers indices of both Standard Bank (50.3 in April against 50.7 in March) and ABSA (44.7 in April against 52.2 in March) dropped in reaction to the downgrading of South Africa’s sovereign debt to junk.

Sales of new motor vehicles also came down sharply by 13.4 percent in April. These weaker domestic economic indicators, together with the global nervousness, caused share prices to decline and the rand to trade much weaker last week

On the JSE, the all share index lost 238 points, or 0.4percent, last week as financial shares (-1.1 percent) and resources (-1.8 percent) recorded the biggest losses. Owing to increases in the share prices of rand hedge stocks, the industrial sector managed to gain 0.5 percent. Property shares moved sideways and the listed property index ended last Friday unchanged on the previous week’s level.

The rand exchange rate continued to move weaker last week on fears of further negative grading’s by the grading agencies and US interest rate hikes. The rand lost 12c, or 0.8 percent, against the dollar and traded at R13.48 to the dollar at the close of JSE on Friday. Against the pound, the currency lost 0.9 percent for the week at R17.43 and against the euro it depreciated by 37c, or 1.8 percent, and traded at R14.82.

All eyes will be on the release of inflation and trade data by most developed economies. Germany will on Friday announce its gross domestic product growth rate for first quarter of the year, while the US will publish its latest retail sales data.

Locally, StatsSA will on Tuesday release unemployment rate for the first quarter of the year.

BUSINESS REPORT