The rand exchange rate remains under pressure as the currency although volatile traded at levels of close to R16.10 to the dollar on Friday. This decrease was mostly due to the sharp decrease in the gold price with $100 (R1 614) last week and the banning of flights from South Africa by the rest of the world after the discovery of the Omricon Covid-19 variant locally. New infections in South Africa quadrupled during the first week after the discovery of the new variant.
US non-farm payrolls for November, released on Friday was disappointing as the US economy added just 210 000 jobs in November. This was the lowest monthly increase a 306 000 decline in December 2020. Market expectations were a much higher figure of 550 thousand.
It is reported that employers continue to report difficulties in hiring and retaining workers amid a strong economic recovery. This disappointing figures points increasingly to a possible economic stagflation. These prospects saw US share indices to continue to move lower.
The Dow Jones industrial index traded last week 0.2 percent lower and is now already 5.4 percent lower than its record high on November, 5, 2021. The S&P500 lost 0.8 percent on Friday and is trading 3.3 percent lower than a month ago, despite the expected positive effects of the increased black Friday sales. The Nasdaq index is staring the expected downward correction the most as the index lost 1.9 percent on Friday alone and is trading 5.5 percent lower than a month ago.
Financial markets, the rand and commodity prices will remain uncertain and volatile for the rest of the month on the effects of the new Covid-19 variant, the Federal Reserve’s last meeting of the year, US inflation data and interest rate adjustments by central banks across the globe.
On the JSE share prices continue to move stronger, although some subsectors are starting to run out of momentum with earlier signs of a possible pull-back. The all share index had a good week and the index closed Friday on 70 807 points, down 213 points for the day, but still 3.2 percent higher than the previous Friday close. The index once again reached a record high level of 71 198 points on Wednesday, December 1, as rand hedging stock ride the weaker rand.
The oil price is leading the expecting slowdown and turnaround of commodity prices. Over the last month, the Brent oil price decreased by 14.8 percent, gold was down by 1.5 percent, silver traded 5.2 percent lower, platinum lost 9.1 percent, steel decreased by 5.1 percent and copper by 1.4 percent.
The sharp decrease in the Brent oil price, is expected to contribute to a substantial decrease in fuel prices in South Africa at the beginning of January, despite the weaker rand.
Domestically this coming week investors will concentrate on the release of South Africa’s gross domestic product (GDP) growth rate for the third quarter of 2021. Given the unrest and looting in KwaZulu- Natal and Gauteng in July it is expected that the economy had grown negatively by -1.8 percent quarter-on-quarter seasonally adjusted and annualised. This is much lower than the 1.2 percent recorded for quarter two 2021.
On Wednesday Statistics South Africa (StatsSA) will publish retail sales for October. It is expected that sales at the shops had increased by 2.3 percent over last year. On Thursday StatsSA will announce the latest mining and manufacturing production data.
On global markets, the US inflation rate for November that will be released on Friday will draw the most attention and reaction across the globe. After advancing from 5.4 percent in September 2021 to 6.2 percent in November 2021 it is expected that the CPI had increased as strongly to 6.9 percent in November.
This may be the last straw breaking in preventing the Federal Reserve to increase interest rates within the next two months. US crude oil inventories and its weekly jobless claims numbers will also be of note. In other developed economies, most countries will release their latest balance of trade data and inflation rates for November. Japan will also announce its GDP economic growth rate for the third quarter of 2021.
Dr Chris Harmse is a chief economist at CH Economics.
BUSINESS REPORT ONLINE