Market and economic wrap - Putin resets Ukrainian borders to Europe’s disgust

Market and economic wrap - Putin resets Ukrainian borders to Europe’s disgust

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The Covid vaccine rollout continues across the country – We have had 3 658 000 people infected with Covid and 98 667 deaths. Last week the country was experiencing around 2800 new cases a day – well off the highs from several months ago. The government also released this week several changes – the period between first and second vaccinations has been reduced from 6 weeks to 3 weeks – and the period for the booster shot has been reduced from 6 months to 3 months after ones second shot. The government is sitting on vaccination supplies that need to be used. 

Other stories that have been grabbing the headlines the past few weeks. 

The focus has been heavily on Russia and Ukraine – and the crisis that is unfolding. Just last night President Putin announced that Russia recognises the independence of the two breakaway regions in the east of Ukraine, sending Russian troops in as so-called “peacemakers” It is expected that he will now use this as his springboard to get Russian troops into other parts of Ukraine. The Western world has already decried it – and immediately announced further levels of sanctions against all businesses that operate in that region. The world awaits to see if a Biden/Putin summit is called as a final last resort -whilst Russia has now 190 000 troops spread along the Ukrainian border. Much diplomacy has been done the past week – with Macron from France and other leaders going to see if they can find a breakthrough – all unsuccessfully. 

This has all proved a welcome distraction for UK PM Boris Johnston – pulling attention away from his Xmas party escapades under Covid lockdown. He has focused on a trip to Russia and changing Covid related regulations. As of Thursday this week you no long will you have to quarantine if you are diagnosed with Covid and basically the UK society can open totally open up. The Queen is the latest to get a positive Covid test - and at 96 years old we wish her a speedy and healthy recovery. 

In South Africa it has been a busy few weeks, The President delivered his SONA (Sate of the Nation report) – where he had very mixed feedback. A key point that went against the grain of much ANC policy is that of recognising that the private sector was needed to create jobs and growth – not the public sector. This week on 24th Feb (Thursday) it will be a critical day as the Minster of Finance announces his 2022 Budget speech. This will set the tone for rest of the year – and we expect to hear some specific comments on funding government debt, the R350 per month sustainably allowance – how this will be funded – and also importantly, some detail on the terms of the foreign IMF borrowings we have taken. The ANC is under immense pressure at this point – everyone is well aware that this is an ANC election year in December, and no one wants to rock the boat too much. 

Last week, global equities weakened as renewed tensions between Russia and Ukraine dented investor sentiment. In the US, the Dow, NASDAQ, and S&P 500 shed just under 2%, respectively. European markets suffered the same fate, with the German Dax down 2.5% and the FTSE down 1.9%. Year-to-date, global stocks have performed poorly, with the NASDAQ down 14.4%. 

The rand has strengthened this year on the back of higher commodity prices and investor optimism over the upcoming budget speech. However, the local currency ended the week 0.1% weaker against the dollar as renewed tensions in Europe dampened the appeal of risker assets. Since the start of the year, the local currency has gained a significant 5.1% against the US dollar. 

Brent crude oil lost 1% over the week, bringing its ten-week rally to an end. Oil prices fell on the news that Iran could start resupplying the market. Over the past four weeks, oil prices were still up 7.3%, as market participants feared that a potential war between Russia and Ukraine could threaten supply. Gold prices rallied for the third straight week, up 2% from the previous week's close. Meanwhile, platinum gained 7.1% over the week and has been trading 15% stronger since the start of the year. 

We caution investors to stick to their long-term investment plans, even as markets will no doubt be volatile over the forthcoming period due to heightened geopolitical tensions. 

Stay safe and stay healthy. Till next time.