Rand higher on favourable local improvements

Market commentary

The rand remained stable at around R18/$, supported by favourable domestic factors, including an improved S&P Global credit rating outlook from stable to positive, a drop in CPI inflation to 2.80%, and progress in infrastructure recovery, such as the end of load-shedding since 1Q24 and improvements in rail freight systems. The rand had previously strengthened after the Reserve Bank cut the repo rate by 25 basis points, a smaller-than-expected reduction. Despite this, the local stock market fell by 0.89%.

On Monday, most US stocks rose during afternoon trading, with the Dow Jones reaching a record high as investors anticipated that President-elect Trump’s Treasury Secretary nominee, hedge fund manager Scott Bessent, might moderate some of his administration's more extreme protectionist policies. Meanwhile, the dollar dropped to its lowest level in two weeks, falling below 107, and the 10-year bond yield fell by over 10 basis points to under 4.30%.

In Europe, stocks closed slightly higher, supported by a global rebound in riskier assets as markets digested recent US political developments. The Eurozone’s Stoxx 50 gained 0.30% to end at 4 803, while the pan-European Stoxx 600 edged up to close at 509. The nomination of Scott Bessent as Treasury Secretary is expected to promote fiscal prudence, marking a shift from earlier Trump-era policy priorities.

Asian markets showed mixed results. Hong Kong's Hang Seng Index fell 0.40% to 19 151, extending losses for a third consecutive session and reaching its lowest level in two months. Investor caution lingered as Chinese markets dropped to a three-week low, with concerns mounting over the Biden administration's upcoming export restrictions on China, which could target up to 200 Chinese chip firms. In Japan, the Nikkei surged 1.30% to 38 780, while the broader Topix Index rose 0.71% to 2 716, as Japanese stocks rallied for a second straight session, buoyed by gains in U.S. futures and relief following Bessent’s nomination.

Brent crude prices dropped 2.90% to $73 per barrel, following reports suggesting progress toward a cease-fire between Israel and Hezbollah. While the news was cautiously welcomed, skepticism remained due to previous failed agreements. Markets also turned their focus to heightened tensions between Ukraine and Russia.