The markets remained moderate yesterday, but the rand rallied back toward a 5-month high buoyed by increasing risk sentiment in spite of rising job losses in South Africa.
South Africa’s unemployment rate hit a new record high of 35.3 percent in the fourth quarter of 2021, mainly due to job losses in manufacturing and construction industries.
Anchor Capital investment analyst Casey Delport, however, said total employment partially recovered as the number of employed persons actually increased by 262 000.
“This is reflective of economic activity having bounced back after the July riots,” Delport said.
“However, due to a bigger increase in the labour force, the unemployment rate actually climbed from 34.9 percent to 35.3 percent in the fourth quarter.”
Despite this, investors have been pouring into financial markets as the start of another round of peace talks between Ukraine and Russia in Turkey showed positive signs.
Russia's deputy defence minister Alexander Fomin said yesterday that Moscow would “drastically” reduce its military presence near Kyiv, suggesting some progress may have been made during the day’s negotiations.
This comes as Ukrainian President Volodymyr Zelenskyy had previously said he was willing to discuss his country’s neutrality to bring an end to the war “without delay”, though he later said he would not sacrifice his country’s territorial integrity.
As risk sentiment returned to the markets, the rand traded strongly throughout the day, strengthening to R14.53 against the US dollar by 5pm.
A stronger dollar, weaker commodity prices, and Covid-19 concerns in China had previously weighed on the rand and other emerging market currencies before Russia/Ukraine talks resumed.
FXTM’s senior research analyst Lukman Otunuga said that the market mood had lifted by hopes from renewed peace talks.
“A sense of positivity returned to financial markets as the prospects of more ceasefire talks between Russia and Ukraine soothed investor jitters,” Otunuga said.
“Ukraine’s president has said he is willing to discuss becoming a neutral country as part of a peace deal with Russia.
“Should a ceasefire agreement become reality, this could boost global sentiment further and revive investor confidence, sending equity markets higher.”
Meanwhile, the JSE lifted to a 1-week high buoyed by industrials and hospitality stocks, rebounding from a previous subdued close after China announced a lockdown in Shanghai due to rising Covid-19 cases.
The All Share Index rose above 75 000 index points in intraday trade before moderating around 74 809 index points by 5pm.
However, the prospect of additional supply chain disruptions stemming from Covid-19 in China, the world’s second-largest economy, and recession risks in the US could limit further gains.
BUSINESS REPORT ONLINE