A steady week

Review of 23 to 27 August and preview of 30 August to 3 September.

The Nedocr Economic Unit reports that the rand was relatively weak against the US dollar but steady against other major currencies.

The local unit weakened to R6,75 against the US dollar on Friday, from R6,64 a week earlier, but was relatively unchanged against the British pound at R12,10 and slightly firmer at R8,13 against the euro from R8,17 a week ago.

Sharply lower-than-expected producer inflation buoyed the bond market, with yields on the longer-dated R153 2010 and the R194 2008 falling to 8,88% and 8,47% respectively from 9,18% and 8,82%.

Money market rates generally moved lower except for the yield on the 3-month NCD, which remained steady at 7,60%. The yields on the on the 6-, 9- and 12-month NCDs eased to 7,75%, 7,90% and 7,95% respectively from 7,85%, 8,00% and 8,15% a week ago.

A strong rally in financials and industrials, on the back of renewed hopes for another interest rate cut, helped the FTSE/JSE all-share index close 2,1% higher on Friday at 11163,4.

This was despite some easing in the resources index, which fell slightly by 0,1% to 11214,6 from 11229,2. Gold stocks were down by 2,5% to 1985,5 from the previous week’s close of 2037,2.

In contrast, financial stocks and industrials bucked the trend, managing strong gains of 4,6% and 3,0% to close at 10376,6 and 9239,6 from 9923,2 and 8966,8.

Inflation figures released during the week remained benign, with CPIX inflation slowing to 4,2% y-o-y (0,3% m-o-m) in July from 5,0% in June, but headline consumer inflation edging higher to 1,6% y-o-y (0,3% m-o-m) from 1,2% in June.

The annual rates and taxes survey, which includes tariff increases in assessment rates, water and waste removals, electricity costs as well as property taxes and insurance as well as a survey on contributions to medical aids were mainly responsible for the monthly rise in CPIX inflation.

However, continued declines in food prices as well as a fall in the transport category – largely due to a 16c/l cut in the petrol price – combined with declines in other categories such as appliances and clothing - helped to contain the rise during the month to below expectations.