The rand strengthened for a third consecutive session on Monday due to profit-taking after the currency moved into overbought territory in May, while the FTSE/JSE All Share Index (ALSI) closed lower as attention shifted to the US monetary policy trajectory following Friday's US jobs report. At 20h00, the rand had strengthened 1.28% to R19.27/$, having reached an intraday best of R19.21/$. Investors will keep a close eye on GDP figures to be released later today to see how the South African economy performed in the first quarter. Economists are anticipating muted growth as the country continues to experience severe rotational blackouts.
Wall Street closed lower on Monday as market participants assessed new economic data while eyeing a potential pause in rate hikes. Factory orders in the US increased by 0.40% in April 2023, below market expectations, while the ISM Services PMI fell to the lowest in five months in May, according to Trading Economics. “Reinforcing expectations of a pause in rate hikes, a survey from the Institute for Supply Management (ISM) showed the US services sector barely grew in May as new orders slowed, pushing a measure of prices paid by businesses for inputs to a three-year low, which could aid the Fed's fight against inflation,” Reuters reported.
Investors weighed easing inflationary pressure in the Eurozone against hawkish remarks from European Central Bank (ECB) President Lagarde as the euro traded around $1.07, holding close to a two-month low of $1.06 seen last Wednesday. Available data also confirmed a larger-than-anticipated deceleration in both consumer and producer prices, “pointing to the possibility that the ECB may hit its peak interest rates in September rather than the previously anticipated December,” Reuters added.
In mixed trading on Monday, the Shanghai Composite gained 0.07%, while the Shenzhen Component fell 0.47% as market participants digested data showing that China's services sector growth quickened in May as the country’s post-pandemic recovery persisted. “The Caixin China General Composite PMI rose to 55.6 in May 2023 from 53.6 in the prior month pointing to the fifth straight month of growth in private sector activity and the steepest pace since December 2020,” Trading Economics reported.
Oil prices increased after Saudi Arabia announced that it would reduce its output to 9 million barrels per day in July from over 10 million barrels per day in May, the largest decrease in years. Oil prices had been under pressure over the past few weeks due to growing fears about China's weakening economy. Brent crude rose 1.70% to $77.43 a barrel at 20h15, while US crude edged up 0.60% to $72.15 a barrel at the same time. After weak US economic data supported the idea that the Fed may halt rate hikes at its next meeting, bullion rose above $1 950 an ounce on Monday, following a slight decline in the greenback and US Treasury yields.
