Rand retreats from two-year peak amid caution over S&P credit rating review

The rand slipped after reaching its strongest level in more than two years, as traders took profits on Friday and approached S&P Global’s scheduled review of South Africa’s sovereign credit rating with caution. By 14h32 GMT, the rand was trading at 17.17 to the dollar, around 0.70% weaker than Thursday’s close. On the Johannesburg Stock Exchange, the Top-40 index was down 2.50%, giving back some of its recent gains. South Africa’s benchmark 2035 government bond also weakened, with the yield rising 5.5 basis points to 8.66%.

US stocks pared earlier losses but remained mixed on Friday as markets reassessed the stretched valuations among major AI firms and the likelihood of a Federal Reserve (Fed) rate cut next month. The S&P 500 and Nasdaq 100 held firm, while the Dow traded 250 points lower. Tech shares led the recovery from the previous session’s sell-off, with Nvidia, Microsoft, and Oracle gaining between 1% and 2%. Companies involved in AI technologies and datacentre infrastructure continued to attract attention, as sharply rising capital expenditure commitments drove valuations higher.

In the UK, the FTSE 100 fell more than 1% on Friday, underperforming European peers, as gilt yields surged and the pound weakened following reports that Chancellor Rachel Reeves may abandon plans to raise income tax in the 26 November budget. The news revived concerns about the UK’s fiscal outlook, prompting money markets to scale back expectations for Bank of England rate cuts to under 60 bps by end-2025. Banks were among the weakest performers, with Lloyds, Barclays, and NatWest all down more than 3.50%, while Standard Chartered (-2.80%) and HSBC (-1.60%) also declined.

Across the Eurozone, the STOXX 50 slipped 0.70% and the STOXX 600 fell 0.90% on Friday, marking a second consecutive session of losses. Sentiment remained cautious as investors grew increasingly wary of potential overvaluation in the AI sector and the risk of a developing bubble. Further downward pressure came from monthly data in China pointing to continued economic slowdown. Tech stocks were among the hardest hit, reflecting global weakness across the sector. ASML Holding (-1.60%), SAP (-2.10%), Infineon Technologies (-2.50%), and Prosus (-3%) all posted notable declines.

In Asia, Japan’s Nikkei 225 Index fell 1.77% to close at 50 376, while the broader Topix Index lost 0.65% to 3 360 on Friday, reversing gains from the previous session and tracking a sharp tech-led sell-off on Wall Street. In China, the Shanghai Composite fell 0.97% to 3 990 and the Shenzhen Component dropped 1.93% to 13 216, with mainland equities retreating from ten-year highs as disappointing data weighed on sentiment.

WTI crude futures rose more than 1% towards $60 per barrel on Friday, on course to break a two-week losing streak, supported by supply risks after Ukrainian drones struck Russia’s Black Sea port of Novorossiysk following a major Russian airstrike on Kyiv. Gold prices gave up earlier gains to slip below $4 120 per ounce on Friday, although the metal remained on track for a weekly rise of around 3%.