SA budget reset lifts sentiment alongside global market gains

Market Commentary

South Africa’s Finance Minister Enoch Godongwana delivered his budget speech noting that global growth is projected at 3.30% in 2026 – broadly in line with last year – with emerging markets, including India and parts of sub-Saharan Africa, continuing to support momentum despite elevated geopolitical tensions and shifting trade dynamics. Against this backdrop, the government aims to diversify trade, strengthen resilience, and position South Africa to capture new growth opportunities.

SA’s real GDP is forecast to rise to 1.60% in 2026 from 1.40% in 2025, averaging 1.80% over the medium term and reaching 2% by 2028, although logistics bottlenecks, infrastructure constraints and the recent foot-and-mouth outbreak remain headwinds. Fiscal policy is centred on accelerating public investment, improving spending efficiency, and embedding a principles-based fiscal anchor. The consolidated deficit is projected to narrow to 4.50% of GDP in 2025/26, while gross debt is expected to peak at 78.90% of GDP this fiscal year before gradually declining, supported by a rising primary surplus and more contained growth in debt-service costs – which are set to fall to 20.20% of revenue by 2028/29 from 21.30% this year.

Improved fiscal metrics have bolstered market confidence, with South Africa’s 10-year government bond yield easing to 7.89% – its lowest since March 2015. The finance minister stated that debt will stabilise for the first time in 17 years as the deficit narrows and borrowing costs moderate. Expectations that Fitch Ratings and Moody’s Ratings may revise their outlooks to positive have further supported demand for local bonds.

European equity indices rose on Wednesday, lifted by fading concerns over AI-related disruptions and measured optimism as markets await further details on US trade policy. The Euro STOXX 50 gained 0.90% to reach a record high of 6 172, while the broader STOXX Europe 600 advanced 0.70% to close at 633, also a new peak. Attention now turns to Nvidia's earnings later today, anticipated to shed light on the ongoing strength of AI demand, with ASML – whose Nvidia orders form a significant revenue portion – climbing 2%. HSBC shares surged 7.60% to an all-time high after reporting stronger-than-expected 2025 results, particularly in its wealth division buoyed by robust client income. Meanwhile, mixed consumer sentiment signals emerged, as German confidence unexpectedly softened ahead of March. Germany’s DAX closed higher at 0.73%.

In London, the FTSE 100 jumped more than 1% to a fresh record, propelled by banking and mining strength. HSBC led the banking rally with its 7.60% rise on solid profits, while commodity stocks advanced amid firmer copper and precious metals prices, with Fresnillo up 7%, Antofagasta 6% and Endeavour Mining with Glencore around 3%. Relx rose 6.30% as its LexisNexis unit announced a tie-up with AI firm Anthropic, alleviating earlier investor concerns. On the downside, Diageo declined 13% following warnings of weaker annual sales and a dividend reduction to bolster its balance sheet.

Positive momentum extended to the US, where equities advanced ahead of Nvidia’s earnings, closely watched for signals on the durability of AI demand. Nvidia rose around 1%, supporting broader semiconductor gains as expectations of strong earnings growth reinforced confidence in technology shares and AI-related capital expenditure, particularly among the Magnificent Seven. Advanced Micro Devices added a further 1%, building on the prior session’s 9% surge after Meta Platforms announced a multi-year agreement to deploy 6 gigawatts of its graphics processing units across AI-focused data centres. Software stocks also extended their recovery as investors reassessed concerns about the longevity of traditional service models. Meanwhile, President Donald Trump’s State of the Union address adopted a less aggressive tone, suggesting sweeping tariffs on all nations may not be prioritised following the Supreme Court’s rejection of certain International Emergency Economic Powers Act (IEEPA) provisions.

Asian equity markets advanced broadly, mirroring a robust Wall Street close dominated by technology stocks. Firmer sentiment around AI provided further support, following Anthropic's comments that its Claude chatbot complements existing business models rather than replacing them, which helped temper fears of extensive disruption. Caution lingers, however, as investors remain alert to uncertainties over US trade policies. The Nikkei rose 2.20%, while the Shanghai Composite increased 0.62% and the Hang Seng 0.40%.

Brent crude retreated to below $71 per barrel on Wednesday, marking a third consecutive session of declines after the US Energy Information Administration reported a sharp build in inventories. Crude stockpiles rose by 15.99 million barrels to 435.8 million in the week ended 20 February, significantly exceeding expectations for a more modest 1.5 million-barrel increase. Despite the pullback, prices remain close to seven-month highs as markets assess the outcome of upcoming US–Iran nuclear talks in Geneva. In precious metals, gold gained 1.20% to trade at $5 209 per ounce, while silver and platinum recorded stronger advances of 4.15% and 6.49%, respectively.