Market and economic wrap - Floods ravage our beloved country

Market and economic wrap - Floods ravage our beloved country

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Ukraine - the second iron curtain

Covid vaccinations continue across the country – We have had 3 764 000 people infected with Covid and 100 333 deaths. Just over 35m vaccinations have been completed. The government is still trying to encourage people to go and get vaccinated– as the risks of a fifth wave seem to be lurking on the horizon. Cases have shown a stark rise in the past 2 weeks, with 6000 new cases reported in the past few days, up from around 2000 prior daily cases. 

What stories have been grabbing the headlines the past few weeks. 

The ongoing conflict in Ukraine still maintains the headlines – with heavy losses on both sides. The Russians seem to have changed tactics, looking to capture and control the Eastern parts of Ukraine, severely damaging and wiping out large cities to rubble. The West continues to put pressure and sanctions on Russia – who have pushed back by stopping gas supplies to Poland and some other neighbouring countries. No peace solution or negotiations seem close to fruition. 

Domestically we have also been facing our challenges. The main news items were the devasting flood that ravaged Kwazulu Natal. Over 400 people lost their lives, and it is estimated the over R50 billion in damages was caused. The cost of poorly maintained infrastructure was severely felt with much storm damage being incurred due to poor drainage of the rainfall that fell intensely. 

Finally, the fourth report of the Zondo commission was released last week on Friday. It was damning on the ANC and government, for largely turning a blind eye and doing nothing to halt the state capture and corruption that occurred under their watch under the Zuma administration. We still await formal responses or actions from the findings from the current government – we await still further reports to be released by the now Chief Justice, Raymond Zondo. 

Global equities ended the week in the red on the back of ongoing concerns regarding high levels of inflation, negative sentiment towards US rate hikes and a weaker global growth outlook. The Nasdaq fell by 3.9% and the S&P by 3.3% for the week. The US markets also took a hit with the fall of Amazon shares, which reported weaker earnings than what was expected. European markets were mixed, with the French CAC and the German Dax both down around 0.5%, whilst the in the UK the FTSE 100 was up marginally by 0.3%. 

The USD strengthened by around 2.1% against both the Euro and Pound on the back of its safe haven status around going concerns of slower growth and rising inflation. 

The crude oil price rose marginally amid increasing supply side strains based on the severe sanctions placed on Russia by the West. Oil was up around 10% for the week, and is up over 37% in USD over the past year – currently hovering just above the $100 a barrel price tag. 

The rand regained some lost ground last week, following a two week slump. It appreciated by around 1% against the Euro and Pound, but weakened by 1.2% against the USD on fears of more aggressive US Fed interest rate hikes which may result in a slowing of global growth. The demand for EM currencies has thus weakened. Concerns locally were also dampened on the back of the KZN floods, rising Covid numbers and increased levels of loadshedding. The rand has now weakened by around 7.3% over the past month against the USD and 3% against the pound and Euro. 

Over the past month the domestic stock market has shed around 4.6% and bond yields continue to tick upwards as markets price in higher potential inflation and interest rate hikes. 

We caution investors to stick to their long-term investment plans, even as markets are volatile over the current Eastern European conflict. 

Stay safe and stay healthy.