Market and economic wrap - Markets show strong rebound

Market and economic wrap - Markets show strong rebound

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Market and economic wrap - Risk-off sentiment dominates markets amid fears of stagflation

Nedgroup Investments Multi-Manager brings you a bi-weekly series of Whatsapp voice notes, focused on providing a market and economic wrap of current local and global news flow. Herewith follows the transcript. This week’s instalment is titled “Markets show strong rebound”. 

Covid vaccinations continue across the country at a slow pace – We have had 3 900 000 people infected with Covid and 100 812 deaths. Just over 35.5m vaccinations have been completed – with around 40 daily deaths being recorded. The government is still trying to encourage people to go and get vaccinated as we are currently in the middle of a fifth wave. 

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

The war in Ukraine continues to grab headlines. Russian tactics have changed, with their efforts now concentrated in the Donbas region on the east. Fighting has been heavy, especially in the city of Mariupol – with the final Ukrainian troops holed up at the Azovstal steel plant forced to surrender. The European Union cannot get full agreement on what course to take with regards to their usage of gas from Russia – due to various countries having varying degrees of reliance of gas. They recognise that the revenues they are paying are being used to fund the war. 

The other story grabbing headlines the last week has been the horrific school shooting in the town of Uvalde, Texas in the US. 19 school children aged 10 and two schoolteachers were shot and killed by a single 18-year-old gunman. As the story is developing it seems that the police erred in their decision making and their delayed storming of the classroom resulted in further shootings occurring. The debate of arms controls and the rights given under the US Second Amendment are again now in the spotlight – and the US waits to see how lawmakers react. 

Last week, global equities rebounded strongly after minutes from the latest FOMC meeting showed that the Federal Reserve might slow down and possibly pause its interest rate hiking cycle later in the year. Investor sentiment was further boosted after large retailers in the US reported robust earnings, and economic data showed a slight improvement in US inflation figures. 

The S&P 500 and Dow Jones Industrial Average gained a massive 6.6% and 6.2%, ending a seven-week losing streak. The NASDAQ ended the week 6.8% higher. European stocks followed suit, with the German Dax, French CAC, and FTSE 100 gaining 3.7%, 3.4%, and 2.6%. 

The benchmark Brent crude oil price rose by a massive 5.9% as supply-side fears continued to grip the market. Over the past four weeks, oil prices have been trading 12.5% higher and are 54% stronger on a year-to-date basis. It trades at $119 a barrel. Gold ended the week marginally higher. 

Last week the rand gained significant momentum amid general dollar weakness. The rand gained a significant 2.1% against the dollar and ended the week 0.9% and 0.6% stronger against the British pound and euro. Slightly higher commodity prices and expectations of further rate hikes by the South African Reserve Bank (SARB) added further support to the local currency. 

Money market rates and bond yields rose from the previous week's close. In the equity market, the JSE all-share index (ALSI) tracked global equities higher. The ALSI gained a massive 4.3%, recording its best week of the year. Basic material stocks rose by almost 6%, while industrial and financial stocks gained 4.3% and 3.2%. However, the ALSI is still trading 2.7% lower over the month – dragged down by significant losses in industrial stocks. 

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

Stay safe and stay healthy.