South African financial markets hit record highs as Rand strengthens

The National budget that was delivered by Finance Minister Godongwana last Wednesday enhanced the current bullish movement in share and bond prices on the JSE, whilst the Rand continue to appreciate. The Minister indicated that fiscal policy is now based on a sound strategy towards:

• Maintain macroeconomic stability, with the inflation rate set on a lower trajectory and targets, the primary budget surplus will increase to over 2.0% of GDP and debt levels and debt servicing costs to come down.
• Implement structural reforms, where public private partnerships will play a bigger role.
• Invest in growth-enhancing infrastructure, by awarding more money to road, water, and municipal capital expenditure programs.
• Build state capacity in the judiciary, police, defense, and education.

Financial markets reacted positively to the Budget in terms of no major tax increases, the adjusted personal income tax brackets, and rebates fully in line with inflation and aggressive measures to enhance savings and investment in the economy.

The All Share index on the JSE reached new records on all three consecutive days on Wednesday reaching a new highest value of 128 456 points on Friday. The index gained 3.7% over the last seven trading days and closed the month of February 2.7% higher and 9.2% up since the beginning of the year.

Share prices were supported by a renewed rally in precious metal prices. The gold price shot up last week by $127, or 2.5%, closing on $5 233 per ounce. The platinum price took a big tumble of $782 per ounce from $2 773 to $1 991 (28%) during the last week of January 2026. The precious metal recovered strongly last week and ended Friday on $2 369, gaining 8.8% over the last seven trading days. The precious metals index also recovered from all losses during the last week of January 2026, gaining 15.0% in February to a new record level last Friday of 184 332 points.

The Rand remains strong

The Rand exchange rate appreciated strongly against the mayor currencies during February as it closed strongly last Friday. Against the US dollar the currency strengthened by 15 cents last week and closed Friday at R15.90/$. This is 23 cents stronger than at the beginning of the month. Against the Pound the Rand strengthened by 20 cents last week and by 64 cents in February and traded on Friday at R21.44/£, against R22.08/£. Against the Euro the Rand appreciated by 12 cents last week and is now stronger by 33 cents during February at R18.79/€.

Global markets

US stocks pulled back on Friday and punished companies that could be made losers by the artificial-intelligence revolution. A surprisingly discouraging update on inflation also hurt the market. US wholesale price inflation shot up to 2.9% last month, much higher than the 1.6% that economist expected market. The number was so much worse than expected that it could persuade the Federal Reserve to hold off longer on its cuts to interest rates.

London's FTSE 100 climbed to a record high on Friday, boosted by heavyweight miners and defensive stocks while Barclays slumped on concerns over its exposure to collapsed UK lender Market Financial Solutions. European shares edged higher on Friday, with the pan-European Stoxx 600 closing 0.11% higher at 633.85 points after touching a fresh intraday record of 636.16 points in morning trade.

Prospects for the coming week

This coming week, apart from expectations of higher precious metal prices to continue and the Rand to appreciate further, StatsSA will release South Africa’s gross domestic product (GDP) economic growth rate for quarter four 2025. It is expected that the real GDP growth rate (quarter-on-quarter and annualised) was 1.8% and the GDP growth rate for 2025 will be 1.6%, as was forecast by Treasury in its Budget documents.

Financial markets await the release of the US non-farm payrolls for February 2026 this coming Friday. Last month the US economy created 130 more jobs. It is expected that it will add only 60,000 more in February. And that the unemployment rate may have increased from 4.3% to 4.4%, increasing the possibility that the Federal Reserve may lower interest rates sooner. On Friday, the US will also announce its latest retail numbers. It is expected that retailers sold less (-0.2%) in January 2026. This also will be negative for US equity markets and the US dollar.

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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