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Last week

04 October 2004 Angelo Coppola

Domestic financial markets ended the week mixed, with the currency easing slightly, but equities ending the week on a stronger note.

The Nedcor Economic Unit reports that the rand softened against major currencies following the release of better than expected inflation figures and worse than expected trade deficit.

The local unit closed lower at R6,50 against the US dollar from R6,42, while weakening to R8,09 and R11,68 against the euro and the British pound respectively from R7,94 and R11,57.

Bond prices closed weaker, with yields on the longer dated R153 2010 and the R194 2008 rising to 8,90% and 8,53% respectively from 8,64% and 8,29%.

Money market rates were largely steady, except for the yield on the 12-month NCD, which declined to 7,55% from 7,70% a week ago. Yields on the 3-, 6- and 9-month NCDs closed at 7,45%, 7,60% and 7,70% respectively on Friday.

The 3-month jibar rose to 7,29% from 7,25%.

All main equity indices surged during the past week on a relatively weaker rand and stronger global markets, pushing the FTSE/JSE all-share index to record highs to end the week 3,1% or 356,8 points higher at 11 871,8.

Resources were up by 3,9% or 435,2 points to 11 670,1, while the gold index gained 2,5% or 48,2 points to end the week at 2 089,9. The financial and industrial indices rose by 3,1% and 2,2% to close at 11 435,9 and 9 830,0 respectively on Friday from 11 088,8 and 9 618,7 a week ago.

Inflation figures for August released during the week continued to undershoot consensus forecasts, remaining relatively benign at both consumer and producer levels.

CPIX inflation slowed to 3,7% y-o-y (down 0,2% m-o-m) from 4,2% in July, while headline inflation rose by 1,0% y-o-y (down 0,2% m-o-m) from 1,6% y-o-y in July.

The lower petrol price, which fell by 23c/l in August, was mainly responsible for the monthly decline in both CPIX and overall inflation.

As a result, vehicle running costs declined by 2,8% in the CPIX index, pushing transport costs, which account for 15,3% of the total index, down by 1,5% during the month.

Declines in medical care and health expenses as well as in clothing and footwear prices helped to contain modest increases in other major categories such as housing and food.

The slight pickup in food inflation, following two months of decline, was still very modest at only 0,1%, with the annual rate at only 1,4%. Producer inflation was up by 1,1% y-o-y (down 0,1% m-o-m) in August.

Lower prices of domestically produced goods, which declined by 0,1% m-o-m (up 2,3% y-o-y) were responsible for the monthly fall in the overall index, while imported inflation was flat during the month but still 2,4% down on a year-on year basis.

A rebound in other loans and advances category during the month as well as strong increases in asset-based finance categories pushed this figure higher.

Growth in asset-based finance surged to 18,8% y-o-y (1,9% m-o-m) from 18,2% (1,7% m-o-m) in July, with instalment sales credit up 1,7% m-o-m and 17,4% y-o-y.

Mortgage finance rose by 2,1% m-o-m and 19,3% y-o-y, while leasing finance used for the purchase of machinery and equipment, was up by 0,8% during the month and 17,7% y-o-y.

The other loans and advances category, which includes overdrafts and credit card facilities, rose by 2,3% and by 0,2% y-o-y.

A trade deficit of R3,1 billion was recorded in August following a deficit of R471 million in July.

The widening in the trade deficit was mainly due to a sharp drop in exports (down 13,4% m-o-m), while imports declined at a slower pace at 3,2% m-o-m.

The trade account recorded a deficit of R6,1 billion during the first eight months of the year compared with a surplus of R15,7 billion during the same period in 2003.

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