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Rand rallies, stocks ride global risk wave

Stocks ended the week on a three-day winning streak.

The rand extended its rally on Friday, brushing off a solid jobs report from the United States to hit a fresh pre-budget high as domestic developments and a global return of risk appetite gave the currency momentum.

On the bourse, shares tracked emerging market stocks higher on hopes the United States and China were mending trade relations, triggering a global surge in risk appetite.

At 1520 GMT the rand was 0.57% firmer at 14.31 per dollar, a touch softer than its session best 14.22 reached shortly after US job growth rebounded sharply in October and wages grew by their largest annual gain in nearly a decade.

While the Federal Reserve is not expected to raise rates at its policy meeting next week, economists believe October’s strong labour data could see the central bank signal a December increase.

The rand advanced more than 1% after the data.

Bonds also rallied, with the yield on the benchmark 10-year government bond dropping 10.5 basis points to 9.185% .

“It’s been a good couple of days for the rand. It didn’t react too well to the budget last week but then the investment summit seemed to help it and so did the axing of the SARS head,” said Halen Bothma of ETM Analytics.

On Thursday, President Cyril Ramaphosa fired the suspended head of the South African Revenue Service (Sars) Tom Moyane over maladministration of the tax agency. Moyane has denied any wrongdoing.

Ramaphosa called a conference last Friday that raised investment pledges, days after the Treasury gave a bleak budget that cut growth forecasts and weakened the rand.

Bothma said hawkish signals by the local central bank was keeping yield seeking investors interested.

The Reserve Bank said on Monday it was ready to lift lending rates to tame inflation.

In the equities market, the Johannesburg All-share index climbed 1.29% to 54 271 points, while the Top 40 Index gained 1.45% to 47 943 points.

Market heavy-weight Naspers closed 3% firmer at R2 898. Naspers owns a one-third stake in Chinese technology giant Tencent, which rallied alongside Chinese stocks after the US and China expressed optimism about resolving their bitter trade disputes.

“Naspers led the way thanks to a rebound in Tencent shares … there was also an improvement in risk sentiment this week thanks to rising expectations of US-China and Brexit trade deals,” NKC African Economics said in a note. 

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