MARKET WRAP: Rand gains as coronavirus fears begin to fade

The rand consolidated its position below R15/$ on Tuesday as global markets gained after officials in China said the spread of coronavirus outbreak is close to being contained, while the local unemployment rate remained steady in the fourth quarter of 2019.

The rand gained for a second day, and was the best performing among emerging-market currencies tracked by Bloomberg on Tuesday. At 5.48pm, it had strengthened 0.91% to R14.8358/$, 0.87% to R16.1918/€ and 0.67% to R19.2918/£. The euro was flat at $1.0915.

Treasury partner at Peregrine Treasury Solutions Bianca Botes said the rand gained “as markets reacted positively to what seems to be the peak of the coronavirus”.

Botes added that the local unemployment rate remaining at third-quarter 2019 levels in the fourth quarter “was also well received, aiding the pullback” in the rand. While the unemployment rate “remains dismal, a further deterioration ... has been avoided as SA continues to battle an economy in disarray”.

The JSE also gained on the day, despite the release of disappointing manufacturing production data in December.

The unemployment rate in the fourth quarter of 2019 remained unchanged at near record highs of 29.1%, Statistics SA’s quarterly labour force survey (QLFS) revealed on Tuesday. However, this was the first time the rate has not decreased in the fourth quarter since 2008.

At these levels, SA’s unemployment rate is deemed to be unsustainably high as the country’s economy battles to grow and create jobs.

Manufacturing production contracted for a seventh month in December, falling far more than economists expected as SA experienced stage six load-shedding for the first time. Factory output decreased by 5.9% year on year in December, while the Bloomberg consensus was for a contraction of 3.9%.

The latest figures come as the country battles load-shedding and declining economic growth prospects, with the International Monetary Fund (IMF) and the World Bank expecting the local economy to grow by less than 1% in 2020.

“The figures are consistent with other indicators of real economic activity, which continue to reflect the lacklustre growth momentum in the domestic economy,” said Nedbank Group Economic Unit analysts in a note. “The outlook for 2020 remains muted with the considerable downside risks mainly emanating from the country’s highly fragile electricity supply and poor fiscal position.”

The JSE all share strengthened 0.23% on the day to 56,981.20 points and the top 40 0.38%. Industrials rose 0.27% and banks 0.63%, while financials were little changed.

The all share has now gained 2.11% so far this week, while it is down 0.13% for the year.

tsobol@businesslive.co.za