Rand gains ground amid soft U.S. data and rolling blackouts

The South African rand strengthened on Monday, buoyed by soft U.S. economic data and anticipation of a data-heavy week ahead, as investors shrugged off the return of rolling blackouts in South Africa. At 15h02, the rand traded at 18.38 to the U.S. dollar, roughly 0.40% stronger than its Friday closing level. The dollar, meanwhile, was about 0.10% stronger against a basket of currencies. Warren Venketas, Trading Services Manager at IG Group, noted that the rand's recent appreciation was largely due to U.S.-specific factors, including soft economic data and ongoing tariff uncertainty as reported by Reuters. He also pointed out that the possibility of a peace treaty between Russia and Ukraine could further support the rand, as geopolitical tensions ease. Domestic investors are likely to focus on South Africa's upcoming consumer inflation data on Wednesday, producer inflation figures on Thursday, and trade and budget balance reports on Friday.

In the U.S., stocks struggled to maintain early gains, with the S&P 500 down 0.40%, the Dow Jones near flat, and the Nasdaq sliding 0.90%, primarily due to losses in technology and consumer discretionary stocks. Microsoft dropped 1.90% to hit a 28-week low of $399.62 after the company announced it had cancelled some leases for U.S. data centre capacity. Other tech stocks, including Broadcom (-2.60%), Tesla (-2.20%), and Meta (-2%), also posted losses. In contrast, Apple saw a 1% rise after unveiling plans to invest $500 billion in the U.S. over the next four years and hire 20 000 new workers.

In the U.K., the FTSE 100 remained largely flat on Monday, as gains in defence stocks were offset by losses in the mining sector. Following Germany's federal election, the victory of opposition leader Friedrich Merz's CDU/CSU bloc raised expectations for increased government spending, lifting defence stocks such as BAE Systems, which rose by over 2%. Centrica extended its gains for a third consecutive session, reaching a one-year high after strong updates. However, miners like Anglo American (-2.40%), Fresnillo (-2%), Antofagasta (-1.80%), and Rio Tinto (-1.40%) tracked lower, impacted by falling iron ore prices and Vietnamese tariffs on China’s steel exports.

In the Eurozone, both the STOXX 50 and STOXX 600 fluctuated on Monday. The former remained flat, while the latter gained 0.20%, as traders assessed the results of Germany’s federal election. The CDU/CSU bloc secured 28.60% of the vote, as expected, but will need to form a coalition to secure a parliamentary majority. Negotiations are likely to be prolonged, with the far-right AfD and the Left Party holding a third of the seats, potentially blocking key legislation, including the debt brake aimed at increasing public spending.

In Asia, the Japanese Nikkei 225 Index gained 0.26% to close at 38 777, while the broader Topix Index rose 0.07% to 2 737, recovering from earlier losses. This rebound followed comments from Bank of Japan Governor Kazuo Ueda, who indicated that the central bank is prepared to increase government bond purchases if long-term interest rates rise sharply. Meanwhile, Japan's core inflation accelerated to 3.20% in January, exceeding forecasts and marking an increase from 3% in December. Headline inflation also rose to 4%, the highest level in two years.

In contrast, the Chinese Shanghai Composite declined 0.18% to 3 373, while the Shenzhen Component fell 0.08% to 10 983 on Monday, as mainland stocks paused after a three-week rally driven by renewed interest in China's technology sector, particularly in artificial intelligence. In the backdrop, Beijing introduced a 2025 action plan to attract foreign investment amid escalating geopolitical tensions and ongoing economic challenges.

In the commodities market, WTI crude oil futures fell to around $70.2 per barrel on Monday, approaching a two-month low amid expectations of resumed exports from Kurdistan's oilfields. Gold, however, held steady near $2 940 per ounce, close to record highs, driven by safe-haven demand amid concerns over U.S. President Donald Trump's tariff plans.