MARKET WRAP: Rand extends losses as risk sentiment wanes
The rand is likely to remain volatile as markets await the medium-term budget; the rescue plan for Eskom; and a credit-ratings review from Moody’s
The rand extended losses on Tuesday as investors remain uncertain about the trajectory of the US-China trade war and global economic growth.
Mixed reports regarding the trade war have weighed on emerging-market currencies this week as markets assess the effect of the prolonged battle on global growth.
The IMF warned on Tuesday that geopolitical uncertainty could slow global GDP growth to a decade low in 2019 saying that the outlook could worsen if the trade war is not resolved.
US treasury secretary Steven Mnuchin said on Monday that the December tariff hike on Chinese goods would be imposed if a trade deal had not been reached, after reports that China wanted the US to scrap the tariff hike.
This followed reports that China wants to hold another round of talks before signing the “phase one” trade agreement with the US.
The rand is likely to remain volatile as markets await the medium-term budget policy statement (MTBPS); the government’s rescue plan for Eskom; and a credit-ratings review from Moody’s Investors Service, which are due in late October and early November.
These key domestic events coincide with the US Federal Reserve’s interest-rate decision, with markets already partially pricing in a third rate cut this year amid concerns of an economic slowdown.
“Easing US policy creates the space for looser policy in emerging-market economies, which will be conducive to domestic growth. For SA, however, the problem of restarting sustainable economic growth is more unique — looser monetary policy by the Reserve Bank [alone] will struggle to deliver growth,” Monex Europe analyst Simon Harvey said.
“The key for the revival of the SA economy comes in the form of economic reforms with a progress report expected in the mid-term budget, prior to Moody’s rating decision early next month.”
At 5.19pm, the rand had weakened 0.17% to R14.8569/$, 0.27% to R16.3993/€ and 1.34% to R18.9457/£ amid renewed optimism for a Brexit deal. The euro firmed 0.12% to $1.1039.
Gold was down 0.73% to $1,482.17/oz and platinum 0.86% to $885.66. Brent crude added 0.25% to $59.34 a barrel.
The Dow was up 0.91% to 27,032.36 points. In Europe, the FTSE 100 was flat while France’s CAC 40 added 1.43% and Germany’s DAX 30 1.5%.
The JSE all share rose 0.64% to 55,573.80 points and the top 40 0.57%. Financials gained 0.86% while gold miners fell 1.52%.
PSG Group gained 1.08% to R230.36. The company said on Tuesday that its recurring earnings per share increased 16% to R5.84 in the six months to end-August.
EOH rose 4.4% to R13.52, despite saying earlier that its loss per share more than doubled from 1,367c to 2,995c in the year to end-July.
Sasol gained 4.85% to R287.93 after it said on Tuesday that it had completed its review into cost overruns at its Lake Charles project in the US.
Statistic SA is expected to release retail sales for August on Wednesday. Bloomberg’s median forecast is for an increase of 1.7%, from 2% in July.