Financial markets are uncertain but remain positive

The All Share index on the JSE remains strong after a third consecutive week of record levels. The index ended last Wednesday at 100 278 points and closed on Friday marginally lower at 100 950 points, gaining 1.2% for the week and is already 21.3% higher since the beginning of the year.

Due to the stronger Rand exchange rate and the effect of the lower interest rates on financial institutions, the financial index performed exceptionally last week. The Fin 15 increased by 3.5% last week. This is more than half the total acceleration for the year-to-date. This index, as a proxy of domestic sentiment, indicates an improvement in confidence. This is echoed by the healthy recovery and increase in the Business Confidence index. 

Recovery in Business confidence in RSA 

The South African Chambers of Industry (SACCI) business index for May 2025 (115.8) returned around and increased by 0.8% on the April 2025 level (114.9) after four months ago (February 2025) record level of 125.8. The index in May 2025 is 7.8% higher than the May 2024 index (year-on-year). The main reason for this improvement in business confidence is the advance in the financial environment. Although the index is subdued by real economic activity dampening the business climate, exports surprisingly (given prospects of the effects of the US tariff increases) showed a positive level of confidence against the previous month. The inflation and precious metal prices sub-indices how healthy they increased over the previous month and last year. The other indices that improved are share prices, financing costs and the Rand exchange rate. The decrease in the repo rate by the Monetary Policy Committee last month will contribute to further improvements in the index over months to come.

Global markets recovered despite Trump tariffs were introduced. 

After the previous week of drama as the announced tariffs by the US Trump administration were imposed, global stock markets recovered last week. European stock markets improved as investors’ sentiment became positive, due to the outcome of meeting between President Donald Trump and President Vladimir Putin over the war in Ukraine. The Stoxx Europe 600 index improved by 0.5%. Germany’s DAX and France’s CAC 40 advanced both by 0.8%, whereas the FTSE 100 increased by 0.1%. Asia-Pacific markets mostly improved, tracking gains on Wall Street after the latest US inflation data raised expectations that the Federal Reserve could cut interest rates next month. US CPI increased by 0.2% from June and the annualised rate remained at 2.7%, lower than market expectations of an annual rise of 2.8%. On Wall Street the Dow Jones industrial index increased last week by 1.75%, S&P 500 improved by 1.0% and the Nasdaq advanced by 0.9%. 

Prospects for this coming week

Domestically all eyes will be on the release by Statistics South Africa this coming Wednesday of RSA inflation rate data for July 2025. It is expected that the annual increase in the CPI was 3.2% and much higher than the 2.9% in June. It will be the first month since March 2025 that the annual inflation rate will be higher than the new proposed target of 3.0% that is proposed by the Reserve Bank. 

Globally, investors will await the release of the US Federal Open Market Commission’s (FOMC) minutes of their previous meeting in July. Investors will look for indications that the committee may lower the U Fedd’s bank rate at their next meeting (September) The release of various housing data in the US during the week will also draw attention. Elsewhere Great Britain will publish its annual inflation rate for July on Wednesday.

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.

BUSINESS REPORT