The rand remained virtually unchanged at R18.28 to the US dollar while the JSE All Share Index rose 0.9% to 80,659 points. File picture: Henk Kruger, Independent Newspapers
By Nicola Mawson
THE RAND moderated on Monday but stocks on the JSE surged nearly 1%, shrugging off uncertainty in the US as there was no clear indication as to whether US President Joe Biden’s replacement, Kamala Harris, will fare better than he did at the polls on November 4.
The domestic currency remained virtually unchanged at R18.28 to the US dollar while the JSE All Share Index rose 0.9% to 80,659 points by 4pm, rebounding after falling for four consecutive days last week on the back of concerns over trade relations between the US and China.
US presidential hopeful Donald Trump has a history of seeing China as a competitor and imposing trade restrictions.
Analysts said they expected this news to dominate this week’s market activity, but others pointed to the US’s interest rate movements as being more important, with cuts expected to start happening in September.
Wichard Cilliers, director and head of market risk at TreasuryONE, said markets were experiencing mixed reactions, and the news of Biden’s withdrawal will overshadow others, such as the measure the US Federal Reserve uses to gauge inflation due out this week.
Cilliers said that Trump’s pragmatic, but unpredictable approach, to foreign policy suggested heightened volatility in the near term, while Harris could battle to get support, strengthening the dollar.
Old Mutual Wealth chief investment strategist Izak Odendaal said that markets were pricing in a Trump win.
“Trump’s policy agenda is built on trade protectionism, and is unlikely to benefit South Africa, though we are also not big enough to be a target,” Odendaal said.
“The direction of US interest rates probably matters more for South African markets than anything else going on in Washington.”
Overall, analysis of Trump’s position on Africa during his last presidency shows that his administration continued with constructive policies, according to the Council on Foreign Relations.
Annabel Bishop, Investec’s chief economist, said the rise in support for Trump to take another term had added to market concerns, as expectations had fluctuated on his attempted assassination and Biden’s decision not to run for re-election.
“Markets worry a Trump presidency would see increased trade restrictions and weaker global gross domestic product growth, negatively affecting South Africa, while uncertainty prevails on foreign and monetary policy, which suppresses risk sentiment,” Bishop said.
However, Ricardo Evangelista, senior analyst, and Pierre Veyret, technical analyst at ActivTrades, said markets reacted positively after Biden dropped out of the 2024 presidential race over the weekend.
“An event like this would normally cause uncertainty and market volatility for traders. However, the news has been well-received by investors,” they said.
– BUSINESS REPORT