MARKETS IN A NUTSHELL
WORLD
EQUITIES
Global equity markets rose after dovish ECB and US Federal Reserve commentary ignited expectations of a half-point US interest rate cut this year — but falling earnings expectations may scupper investor appetite for equities
BONDS
Demand for sovereign debt soared, with an astounding $12 trillion of government debt now negative yielding — the US yield curve inverted, suggesting a weaker growth outlook and commensurately lower policy rates
CURRENCIES
The US dollar was broadly weaker after Federal Open Market Committee minutes portended near-term US interest rate cuts — the pound was weaker on continued Brexit uncertainty
COMMODITIES
Iron ore prices rose sharply on supply concerns, oil retreated on rising inventory levels and gold rose sharply on the prospect of lower US interest rates — the longer term outlook for commodity prices is skewed to the downside given expectations for weaker global growth, although US dollar weakness may support commodities in the short term
ECONOMY
Growth in the two largest global economies slowed as the US–China trade war escalated — culminating in the US branding Huawei, HIKVision and other Chinese technology businesses national security risks
MONETARY AND FISCAL POLICY
The Fed kept rates unchanged but signalled its propensity to lower the target rate amid growing macro risks and slower growth — there is a high probability of at least two quarter-point reductions this year, unless employment gains continue and sentiment improves
SOUTH AFRICA
EQUITIES
The FTSE/JSE Capped All Share Index advanced, led by financials and industrials, while resources lagged — interest rate sensitive shares benefited from falling bond yields
BONDS
SA bonds rallied as yields fell across all maturities, with the R186 gaining most — prospects of further gains are increasingly assured given expectations that the SA Reserve Bank will lower the repo rate
CURRENCIES
The rand breached R15 to the US dollar on ANC infighting about the SARB’s independence but rallied latterly on broad-based US dollar weakness — but poor SA fiscal and economic prospects bode ill for the rand
COMMODITIES
Iron ore prices rose sharply on supply concerns, oil retreated on rising inventory levels and gold rose sharply on the prospect of lower US interest rates — the longer term outlook for commodity prices is skewed to the downside given expectations for weaker global growth, although US dollar weakness may support commodities in the short term
ECONOMY
First-quarter GDP contracted the most in a decade as severe load shedding constrained mining and manufacturing output — growth should improve but will remain well below Treasury’s optimistic forecasts
MONETARY AND FISCAL POLICY
Inflation should rise as petrol, water and electricity prices accelerate — but poor consumer demand and competition by retailers should constrain inflation to the midpoint of the 3-6% inflation target, leaving further scope for rate cuts