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JSE Rises, Rand Weakens as Markets React to EFF Shutdown and Await Federal Reserve Announcement

Published by
WIlliam Dube

The Johannesburg Stock Exchange (JSE) experienced a lift on Monday, primarily driven by rand hedges and precious metals miners. This comes amid global concerns over recent banking crises in other countries, which have also put some pressure on the rand. The Economic Freedom Fighters (EFF) proceeded with their planned shutdown, organizing a central event at Church Square in Pretoria.

  1. The Johannesburg Stock Exchange (JSE) experienced a boost, driven by rand hedges and precious metals miners, while the rand weakened amid global concerns over banking crises and the EFF’s planned shutdown event in Pretoria.
  2. Market attention is focused on the upcoming US Federal Reserve policy announcement on Wednesday, with increasing probability (47.6%) of a pause in rate hikes, as fears of a banking crisis have led to heightened risk aversion and a surge in safe-haven assets like gold.
  3. Switzerland’s largest bank, UBS, is in the process of acquiring the country’s second-largest bank, Credit Suisse, in an effort to avoid a banking crisis, while investors and market participants closely monitor the Federal Reserve’s announcement and its potential implications for global markets.

In midday trading, the JSE had climbed 1.27%, with Naspers rising about 3.4% and Richemont 2.7%. On the other hand, FirstRand had dropped 1.9%, and Standard Bank 1.8%. Gold miners experienced a significant surge, with Harmony Gold up nearly 10% and DRDGold increasing more than 8%. For the first time in a year, the precious metal surpassed $2,000 an ounce.

The rand weakened by 0.5% at R18.50/$, while its emerging market counterparts, the Brazilian real and the Turkish lira, remained flat. The Mexican peso, however, had lost 0.6%.

This week, the market’s focus is on the upcoming US Federal Reserve policy announcement on Wednesday. Fears of a banking crisis have led to increased risk aversion and heightened the appeal of safe-haven assets like gold.

IG SA’s senior market analyst, Shaun Murison, observed that risk-off trade was evident in global equity markets, which were generally weaker in early trading. He cited concerns about US and European banks as primary catalysts. “The rand is an underperforming currency today and weakening against what has actually been a softer dollar in general,” Murison noted. “This does suggest that today’s national shutdown is playing a role in investor sentiment, adding to some of the other domestic catalysts in play.”

These domestic factors include South Africa’s recent grey listing, a ratings outlook downgrade, a weak economic outlook, the financial burden of state-owned enterprises on the fiscus, a struggling power utility, and ongoing load shedding.

TreasuryONE currency dealer Andre Botha said, “Emerging markets had a rough start to the morning due to the banking crisis in other markets, but no measurable weakness in the rand can be attributable to the shutdown.”

Botha also pointed out that the risk premium in the rand is still present, as the currency hovered around the R18.50 mark despite the US dollar’s general weakening.

The heightened risk sentiment has not led to broader gains in the dollar. Murison mentioned that there is an increasing probability—about 47.6%—that the US could pause the hiking of rates at Wednesday’s Federal Reserve meeting.

Market attention is also focused on a deal by Switzerland’s largest bank, UBS, to acquire the country’s second-largest bank, Credit Suisse, in an effort to avoid a banking crisis. On Monday, Credit Suisse shares plunged nearly 60%, while UBS shares declined more than 6%.

Swissquote Bank senior market analyst Ipek Ozkardeskaya commented in a note on Monday morning, “The next few hours of trading will give us a better picture on whether the crisis is contained.”

Ozkardeskaya added, “In theory, there is no reason for the Credit Suisse crisis to extend, as what triggered the last quake for Credit Suisse was a confidence crisis – which doesn’t concern UBS – a bank outside of the turmoil, with, in addition, ample liquidity and guarantee from the Swiss National Bank and the government.”

She concluded, “So, if all goes well, shaky days across banks will soon be left behind and investors could concentrate on the Fed decision.” The market now awaits the Federal Reserve’s announcement, which will likely have significant implications for global markets and investors. Amidst the banking crises and ongoing concerns, investors and market participants will be closely monitoring the Fed’s decision, which could influence the direction of currencies, stock markets, and interest rates in the near future.

In these uncertain times, the combination of international banking turmoil, local political events such as the EFF shutdown, and the impending Federal Reserve announcement has resulted in increased market volatility. As investors weigh the potential outcomes, the focus remains on how these events will impact not only the JSE and the rand but also the broader global financial landscape.

With the potential for shifts in both local and global markets, investors will need to stay vigilant and make informed decisions based on the latest news and market data. The outcome of the Federal Reserve meeting and the consequences of the EFF shutdown will be crucial for understanding the trajectory of the South African economy and the JSE, as well as the performance of other emerging markets.

WIlliam Dube

William Dube is a finance and economic news expert with over 10 years of experience in economic anaylsis, financial product assessment and market analysis. With a numerous certificates from prestigious universities including but not limited to Yale University and the University of Pennyslivenia. William specializes in providing insightful news developments in South Africa and commentary on investment strategies, risk management, and global economic trends. You can contact him on william@rateweb.co.za

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Published by
WIlliam Dube

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