Markets In A Nutshell
World
South Africa
Equities
World
Developed market equities face headwinds of slowing growth, supply bottlenecks and fears of hawkish central bank policy—Chinese bourses fell by nearly a fifth on China’s first pandemic-related GDP contraction and after swingeing regulatory interventions spooked investors
South Africa
The JSE eked out a gain, buoyed by banks, listed property and pharmaceutical stocks even as Naspers and Prosus fell on Tencent’s sharp pullback—but resources fell again as key industrial and precious metals prices retraced
Bonds
World
Developed market bond yields rose on inflation worries and expectations for rising rates—the imminent tapering of the Fed’s stimulus programme and prospects of a 2022 US rate increase should put pressure on yields
South Africa
The ALBI ended flat, with bond yields latterly tracking global yields higher—weaker commodity prices and higher inflation are near-term headwinds for bonds
Currencies
World
US dollar resilience should persist in the short term given economic expectations and interest rate differentials—but higher inflation and the sheer size of the US debt burden suggest longer term dollar weakness
South Africa
The rand gave back 80 cents against the dollar late in the quarter—US dollar strength, emerging market jitters and commodity price weakness all contributed to its depreciation
Commodities
World
Industrial and precious metals prices came under pressure on US dollar strength and the opportunity costs of higher rates, while oil prices rose above $80/bbl on Chinese power constraints—but iron ore slumped on slowing Chinese growth and the possibly imminent default of China’s largest property developer, Evergrande
Economy
World
The pace of global growth is slowing despite ongoing stimulus—supply-chain bottlenecks and sporadic Delta variant flare ups should dampen near-term prospects despite greater social and travel freedoms
South Africa
GDP growth surprised, but manufacturing and construction contracted—Stats SA’s inclusion of new areas of economic value add resulted in nominal GDP ballooning more than 10%
Monetary and fiscal policy
World
US officials indicated that the pace of the US economic recovery warranted an earlier tapering of its bond-buying programme—absent a major setback in growth, the long-anticipated increase in the US federal funds rate should follow only in late 2022
South Africa
Tax revenues significantly outpaced earlier projections on elevated commodity prices and rebounding economic activity—the budget deficit should narrow significantly this fiscal year, but forecasts remain uncertain given poor economic prospects