The Johannesburg Stock Exchange. File picture: Siphiwe Sibeko
JOHANNESBURG - Domestic financial markets started tracking the rest of the globe last week and recovered steadily.

Data showing that retail sales in South Africa soared by more than 8 percent (year-on-year) in November, the stronger rand, higher commodity prices and the decision by the Monetary Policy Committee (MPC ) not to increase the repo rate, all contributed to the improvement in financial markets.

The governor of the SA Reserve Bank Letsetja Kganyago noted that the country’s “inflation forecast has improved despite continued increases in international oil prices”. The MPC expects that over the near-term inflation will remain close to 4.5percent (mid-point of the target range).

In reaction to the above positive movements, shares on the JSE followed the rest of the world higher as stocks on international bourses continue their bullish movements.

The Dow Jones industrial average continued its strong upward movement of the previous week and broke through the 26000 points on Thursday.

The all share index gained 1.4percent last week and is now already 2.5percent higher since the end of December, and 15.3percent better than a year ago.

As a result of the stronger rand, financial shares gained more than 2.3percent. The rand also did not have a negative effect on industrial shares as the index increased by 2.04percent.

Despite the sharp increase in the gold and platinum prices, the resources index decreased by 1.3percent as the stronger currency depreciated commodity prices in rand terms.

The rand had firmed last week mostly due to positive sentiment after the bullish stance of the MPC on inflation prospects. The currency had appreciated to R12.20 to the dollar on Friday afternoon, or 24c (1.9percent) stronger than the previous week.

Against the pound, the rand had gained 0.3percent last week and traded at R16.94. Against the euro, the local unit also moved stronger by 12c at R14.96.

This week investors will await the announcement of South Africa’s inflation rate for December, as well as the release of the fourth quarter GDP growth figures for the US, UK and South Korea.