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Rand Breaks Four-day Winning Streak Ahead of Cabinet Appointments

Published 2024/06/21, 08:23

The local currency ended a four-day winning streak on Thursday as attention shifted to President Cyril Ramaphosa's cabinet appointments. Ramaphosa, who began his second term as President on Wednesday, is set to announce his cabinet later today. Media reports stated that the ANC leadership has advocated for continuity in several important sectors, particularly the economic cluster, with Enoch Godongwana expected to remain as finance minister. At 18h30, the rand had weakened 0.57% to R18.06/$, 0.35% to R19.34/€ and 0.66% to R22.96/£. The FTSE/JSE All Share Index fell about 0.80% to close at 80 073 on Thursday, on some profit-taking after three consecutive sessions of advances that sent the main index to record highs. The focus is now on the viability of the unity government agreement between such ideologically diverse parties.

Wall Street ended mixed on Thursday, as investors took advantage of the tech sector’s strong performance, locking in their gains while speculating on how far mega-caps that lead the artificial intelligence (AI) rally can continue to carry major stock indices, as economic data shows growing evidence that the US economy is slowly losing its resilience to higher interest rates by the Federal Reserve. In regular trading on Thursday, Trading Economics reported that the S&P 500 and Nasdaq Composite dropped 0.25% and 0.79%, respectively, with both benchmarks pulling back from record highs. Meanwhile, the Dow gained 0.77% for its best day this month.

European stocks closed higher on Thursday, reversing losses from the previous session and reaching a one-week high. The rise was supported by an improved credit conditions outlook following decisions by major European monetary authorities. The Eurozone's STOXX 50 gained 1.20%, closing at 4 946 points, while the pan-European STOXX 600 increased by 0.80% to 518. The Swiss National Bank reduced its key interest rate by 25 basis points, continuing its rate-cutting cycle, and the Bank of England adopted a dovish stance, with slower inflation in the UK influencing several policymakers towards potentially lowering borrowing costs. The tech sector led the gains, with chip-makers rebounding from their steep selloffs the previous day. ASML (AS:ASML), the largest stock in the STOXX 50, closed 2.30% higher, buoyed by positive sentiment from their US counterparts.

Asian stock markets mostly declined on Thursday as investors awaited new market catalysts, with Japanese inflation data and regional manufacturing and services PMI figures due for release later today. Meanwhile, the People’s Bank of China maintained its one-year and five-year loan prime rates at 3.45% and 3.95%, respectively, which saw the Shanghai Composite fall 0.42% to close at 3 005 points while the Shenzhen Component dropped 1.63% to 9 069, with mainland stocks hitting multi-month lows. Trading Economics reported that shares in Australia, Japan and Hong Kong declined, while South Korean stocks extended gains.

Due to decreasing US crude stocks and rising Middle East conflict, Brent crude futures maintained above $85.58 per barrel on Thursday and were up more than 3% so far this week. This puts them on track for a second straight weekly gain. Trading Economics reported, "Data released on Thursday showed that US crude stockpiles declined by 2.547 million barrels last week, exceeding forecasts for a 2 million barrel draw. US gasoline and distillate stocks also experienced surprise drawdowns, indicating robust energy demand. In the Middle East, Israeli forces advanced deeper into the Gaza Strip city of Rafah, raising geopolitical tensions in the region that could disrupt oil flows.”

Gold remained steady around $2 360 an ounce on Thursday, staying at its highest level in two weeks and poised to achieve its second consecutive weekly gain. This stability comes as weak US economic data continues to bolster expectations that the Federal Reserve might lower interest rates later this year.

PSG Wealth Daily Investment Update, 21 June 2024

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