Expectations before the US Federal Reserve meeting earlier last week, had already pushed up US bond yields, as investors expected a possible interest rate hike. This led to a huge selling of emerging market shares throughout the week.
Although the Fed did not increase its discount rate at its meeting, the hawkish stance of the committee over inflation expectations for the US and future rate hikes, pushed bond yields up even further. These events caused havoc amongst share prices of emerging markets.
On the JSE, the saga around Capitec Bank and PSG Group, as well as further doom and gloom for Steinhoff, contributed to the share slump.
The all share index lost a massive 2939 points, or 4.8percent, last week. This means the index now trades 1.4percent lower than at the beginning of the year.
These negative movements come despite the best optimism in years for the geopolitical scenario for 2018.
Despite the weaker rand, industrial shares, and therefore rand hedgers, could not prevent the industrial index dropping 5.4percent.
The more stable gold and platinum prices, as well as the weaker rand, however, helped the resources index lose only 2.4percent.
Financial shares, on the back of the PSG and Capitec Bank uncertainty, traded down 5.3percent.
The rand depreciated substantially last week. The weaker currency was mostly due to the stronger dollar as well as the negative sentiment against emerging market currencies, given higher US bond yields.
The rand lost almost 20c (1.3percent) against the greenback and traded at R12.05 on Friday evening. Against the euro, it moved weaker by 20c at R14.97.
This week investors will await the announcement of South Africa’s manufacturing and mining production data.
On the global front, a lot of countries will release their latest balance of trade data and several central banks will make their interest rate decisions.