eBusiness Weekly
AFP, Reuters and News24
By Monday midday, the rand sank to R17.60/$ as the dollar continued to gain after a forecast-busting US jobs report fanned expectations of more Federal Reserve interest rate hikes.
Adding to a shift away from riskier assets, like the rand, were geopolitical concerns. This weekend, the US shot down a suspected Chinese spy balloon that had floated across the country for days.
The rand has been bleeding hard since Friday, with news of a sharp contraction in local business activity adding to pressure on the currency.
S&P Global’s South Africa Purchasing Managers Index (PMI) fell to 48.7 in January from 50.2 in December.
It was the fastest pace of contraction since the end of 2021 as new orders fell due to load shedding and a limping economy, Reuters reported.
The rand started the year around R17.00/$. It also lost ground against the euro (R18.96) and the pound (R21.19) on Monday.
Heavy blow
The global market rally enjoyed through January has come to a halt this month as investors contemplate an extended period of high borrowing costs aimed at bringing inflation down from multi-decade highs.
A softer tone from the Fed regarding its monetary tightening campaign had allowed market participants to entertain the possibility of a pause, or even a cut, later in the year.
But that optimism was dealt a heavy blow Friday by data showing more than half a million new jobs were created in the US last month, nearly double the December figure and far more than the 188 000 expected.
Government figures also showed unemployment fell to the lowest level since 1969.
The reading showed the world’s biggest economy remained strong despite almost a year of rate hikes and soaring prices, indicating the Fed still had plenty of work to do to rein in inflation.
“We are concerned that on the back of this kind of jobs report, it definitely holds the Fed to a higher-for-longer path,” said Lisa Erickson at US Bank Wealth Management.
“There are of course other data points that are going to come before the next meeting, but it certainly puts a placeholder that the labour market continues to run some risk of being extremely tight.”
Traders now expect the Fed to keep pushing rates up to more than 5 percent before stopping.
And San Francisco Fed chief Mary Daly said she was prepared to keep hiking, while rates would also remain elevated for some time.
All three main indexes sank on Wall Street, with the Nasdaq down more than 1 percent as tech firms took a hit after disappointing earnings from giants Amazon, Alphabet and Apple.
The losses continued in Asia, with Hong Kong falling around 2 percent, while Shanghai, Sydney, Seoul, Taipei, Bangkok, Wellington Manila and Jakarta were also down.
The JSE’s All Share Index fell almost a percent by Monday midday, with Kumba (-4 percent) and Northam (-3.5 percent) among the biggest losers.
London, Paris and Frankfurt opened with losses.
However, there were gains in Tokyo.
Mumbai fell again with embattled tycoon Gautam Adani’s troubled empire suffering more big losses, meaning it has now lost around $120 billion.
Flagship Adani Enterprises, which gained more than 1 000 percent in five years before the rout, was down 2.6 percent, having been off almost 10 percent in early trade.
Trading in Adani Total Gas and in Adani Power was again suspended after the stocks fell 5 percent
