Financial News 29th May 2023

Market Overview
The FTSE/JSE All Share closed last week at 76 589.54, decreasing by 2.00%. During the previous week, the consumer staples sector was the only positive contributor increasing by 0.58%. The technology and oil & gas sectors were the biggest detractors decreasing by 5.34% and 4.10% respectively.

Looking at the MSCI indices, developed markets decreased by 0.47% during the previous week while emerging markets decreased by 0.41% over the same period.

SA rates continue to climb
The Monetary Policy Committee (MPC) decided to increase the repo rate by 50 basis points to 8.25%. Short term interest rates have now increased by 4.75% since the low of 3.5%. The decision was unanimous with all five MPC members preferring the 50 basis point increase. The market had widely expected a rate hike as inflation has remained sticky and above the top end of the target band, with debate only on whether the hike would be 25 or 50 basis points. 

For the second consecutive meeting global GDP growth is forecast to improve in 2023, from 2.0% to 2.4% and in 2024 from 2.5% to 2.7%. This is compared to the forecast in South Africa where GDP growth is expected to be marginally higher in 2023 at 0.3% from the 0.2% expectation in the previous meeting. This takes into account the estimated 2% negative impact on South African GDP growth due to loadshedding. The GDP forecasts for 2024 and 2025 were unchanged at 1.0% and 1.1% respectively. The governor highlighted that GDP growth has been volatile and that a sustained reduction in loadshedding or an increased supply from alternative sources would be required to raise growth.

Where to next for interest rates in South Africa
Economists and analysts have had time to digest the latest interest rate hike from the South African Reserve Bank and engage with the central bank over its decision. Read the full Businesstech article here>

Rand steady at weak levels amid mounting Fed hike bets, debt ceiling deal optimism
The dollar held firm on Monday supported by growing expectations of further rate hikes by the U.S. Federal Reserve, though news that a debt ceiling deal had been finalised drew some of the safe haven bids away from the greenback. Read the full News24 article here>

Europe’s economic engine is breaking down
Economists see German growth lagging behind the rest of the region for years to come, and the International Monetary Fund estimates Germany will be the worst-performing G-7 economy this year. Read the full Moneyweb article here>

Oil steady as US reaches tentative debt deal
London — Oil prices were steady on Monday after US leaders reached a tentative debt ceiling deal, possibly averting a default in the world’s largest economy and oil consumer but concerns about further interest rate hikes capped gains. Read the full Business Day article here>

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