JOHANNESBURG – The rand weakened against the dollar on Friday and stocks ended lower, tracking weaker European markets that were weighed down by Italy budget worries.
At 5pm, the rand was bid at R14.15 a dollar, 0.11 percent weaker than its close on Thursday.
Italy’s government bonds, European stock markets and the euro were hit hard on Friday after Rome agreed to set a higher than expected budget deficit target that could put it on a collision course with Brussels.
The rand, which had weakened to a session low of R14.26, trimmed some of its losses after positive credit and trade numbers.
Revenue agency data showed on Friday that South Africa’s trade balance swung to a surplus of R8.79 billion in August from a revised R5.29bn deficit in July as exports rose and imports fell.
Earlier, central bank data showed that growth in private sector credit demand and money supply rose in August.
“The spikes reported in both M3 money supply and (private sector credit extension) growth in August reflected to a large extent the significant depreciation in the rand exchange rate and subsequent impact on valuations of foreign assets ... rather than any notable improvement in the credit environment,” Elize Kruger at NKC African Economics said in a note.
“The underlying credit environment is still strained and continues to reflect the dismal state of the economy.”
In fixed income, the yield on the benchmark government bond due in 2026 was flat at 9 percent.
On the bourse, the all share index was down 0.50 percent to 55,708 points while the blue chip Top-40 index fell 0.56 percent to 49,520 points.
The banking index fell 1.19 percent.
“Our banks were aggressively sold off as the sell off in Italy began. I think it was just a knee-jerk reaction and we will hopefully see a recovery,” said Vasili Girasis, equities trader at BP Bernstein.
Netcare fell for a second day, down 3.16 percent after it said on Thursday that it expects core profit margins to fall 30-50 basis points.