South African financial markets ended strong in reaction to US non-farm payrolls

The All Share index on the JSE, as well as the Rand on Friday ended stronger in reaction to the release of the US non-Farm payrolls. The All Share index recovered by 0.9% on Friday and ended the week flat with a mere 300 points lower on 101532. The index, however, is still 20.7% up for the year. The US announced that the economy could only create 22 000 new jobs during August 2025. This is much lower than the expected increase of 72 000. The unemployment rate for the US increased from 4.2% to 4.3% as was expected.

Especially since April 2025, after the first comprehensive tariff announcement by the Trump administration, consumers and producers started to discount negative consumer and business confidence due to expectations for higher inflation and lower economic activity. Most businesses decided not to take changes by investing in new opportunities and employing more workers.

The Federal Reserve lowering rates is a reality.

The more profound US inflation measure the Personal Consumption Expenditure (PCE) price index that was released the previous week showed a strong increase of 2.7% in July, much higher than the 2.0% target of the US Federal Reserve. In line with Federal Reserve chair Jerome Powel's speech at Jackson hole the previous Friday, markets expect with a big certainty that the Federal Reserve will cut its Bank rate by 0.25% at its next meeting on 16-17 September. Bank of America altered its forecast of no rate cuts this year to two downward adjustments now, and in October. In addition, the bank sees the Fed lowering another three times in 2026.

The Rand appreciated by 20 cents at the close on Friday on R17.56/$, still 10 cents weaker than the previous strong close at R17.45/$, but a 100 cents stronger than a year ago (R18.56/$). The price for Gold recorded a new record level at the close on Friday trading at $3 600 per ounce. Brent oil price continued to lose ground and closed last week at $65.64. This is $2 per barrel lower than $67.64 a week ago. The stronger Rand and lower oil price already point towards a decrease the diesel price in South Africa at the beginning of October

If the Federal Reserve lowers it Bank rate this month the changes are good that the Reserve Bank’s Monetary Policy Committee (MPC) will follow at their next meeting 16-18 September. A stronger Rand and expectations of lower fuel and import prices can affect another cut in the repo rate.

In the US equity prices ended on Friday, mostly lower. The S&P 500 closed -0.3% lower but gained 0.32% over the week in reaction to the Jackson hole comments by the Fed chairperson.

Prospects for this coming week

South Africa awaits the publication by Statistics South Africa of the country’s mining and manufacturing production numbers for July this coming Thursday. The Reserve Bank will publish its quarterly bulletin for Q3 2025 on Wednesday. The current account of the balance of payments during the second quarter of 2025 will be one of the prominent figures in the publication.

On global financial markets investors, economists and analysts awaits the release of the US inflation and core-inflation rates for August 2025. It is expected that both have increased by 0.2% to 3.3% and 2.9%, respectively.

Chris Harmse is the consulting economist of Sequoia Capital Management and a senior lecturer at Stadio Higher Education.

*** The views expressed here do not necessarily represent those of Independent Media or IOL.

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