Rand outperforms most emerging market currencies as polls show waning support for ANC

Market commentary

The rand outperformed most emerging market currencies on Friday after a recent poll by global market researcher Ipsos showed support for the ruling ANC dwindling only weeks before the national elections. Business Day reported that: “The Ipsos poll showed ANC support falling to 40.20% from 40.50% previously. The biggest loser in the survey, which polled more than 2 500 South Africans from all demographics, was the EFF, which Ipsos polled at 11.50%, from 19.60% in February. EFF support appears to be moving, in the main, to former president Jacob Zuma’s MK, which recently burst onto the scene and already has 11.50% support among those polled. The DA moved up from 20.50% to 21.90%.” At 18h00, the rand had gained 1.11% to R18.81/$, 1.49% to R20.10/€ and 1.40% to R23.44/£.The local bourse also logged its largest increase in more than three weeks, with the FTSE/JSE All Share Index rising 1.40% to 75 370 points and the top 40 up by 1.34%.

Strong earnings reports from Alphabet and Microsoft sent US stock markets higher on Friday, with the tech-heavy Nasdaq leading by a 2% gain. Investors shrugged off worries about high prices as the Dow Jones rose 153 points and the S&P 500 gained 1%. This after the Federal Reserve's favoured inflation gauge showed persistent price pressures. According to data released on 26 April by the Commerce Department's Bureau of Economic Analysis, the core Personal Consumption Expenditures Price Index (PCE)—which excludes the volatile food and energy components—rose 0.30% from the previous month. It rose by 2.80% from the previous year. The prices for goods edged up 0.10% as increases in the costs of gasoline, clothing and footwear were partially offset by a decline in prices of motor vehicles and parts.

European markets extended gains on Friday, with the wider STOXX 600 gaining 1.20% after British banking stocks rose to an almost nine-year high aided by positive first-quarter results from retail giant NatWest. Meanwhile, the STOXX 50 maintained its early gains and closed 1.40% higher at 5 007 on Friday. The tech industry was also supported by US tech giants Microsoft and Alphabet, after they each reported strong earnings. Meanwhile, investors dissected the latest European Central Bank (ECB) survey, which showed that inflation expectations had fallen to their lowest point in more than two years, even if the US PCE data indicated that inflationary pressures persisted.

Asian equity markets mostly rose on Friday as the Bank of Japan held interest rates steady in a widely expected move. Chinese stocks advanced, tracking gains among global peers as strong earnings from major US tech giants boosted market sentiment. The Shanghai Composite jumped 1.17% to close at a six-month high on Friday, extending a two-day winning streak after analysts from global investment firms upgraded their views on the country’s investment landscape citing an improving macro outlook.

In commodities, Brent crude edged 0.46% higher to trade at $89.42 a barrel, while gold rose 0.18% to $2 336.05 an ounce at 18h00 on Friday, as investors continued to evaluate the potential monetary policy path by the Fed after the US PCE data came largely in line with expectations.