Business Market Focuses on EFF Shutdown and the Fed as JSE Rises and Rand Weakens

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On Monday, the Johannesburg Stock Exchange was buoyed by the performance of companies that generate revenue in foreign currency and those that mine precious metals, which helped to offset concerns about worldwide banking crises. At the same time, the South African rand was under some stress. Meanwhile, the Economic Freedom Fighters continued with their scheduled protest, staging a significant demonstration at Church Square in Pretoria.

In the middle of the trading day, the JSE experienced a 1.27% increase. Naspers and Richemont saw gains of around 3.4% and 2.7%, respectively. However, FirstRand and Standard Bank experienced a decline of about 1.9% and 1.8%, respectively. The gold mining sector saw a surge in activity as Harmony Gold went up by nearly 10% and DRDGold increased by over 8%. This was due in part to the price of gold reaching $2,000 per ounce for the first time in a year.

The South African rand's value decreased by 0.5%, and it now stands at R18.50/$. However, when compared to other emerging market currencies like the Brazilian real and Turkish lira, these remained unchanged. Conversely, the Mexican peso has depreciated by 0.6%.

This week, everyone's focus is on the US Federal Reserve policy announcement scheduled for Wednesday. There is concern about a possible banking crisis, which is causing people to be more cautious and interested in safe investments like gold.

According to Shaun Murison, a senior market analyst at IG SA, global stock markets are mostly down today due to lower risk appetite for investments. The reason for this is believed to be concern about the stability of US and European banks, posing a major threat. As for the South African rand, it is performing poorly against other currencies, despite the US dollar being weaker overall. It seems that the current national shutdown is also affecting investor confidence, along with other local factors.

He stated that there were various factors affecting South Africa's current situation. These encompassed the country's recent placement on the grey list, a reduction in ratings outlook, a bleak economic forecast, the financial strain caused by state-owned companies, a struggling power utility, and the implementation of load shedding.

At the beginning of the day, emerging markets faced some difficulties because of the banking crisis in other markets. However, TreasuryONE currency dealer Andre Botha stated that there were no noticeable negative effects on the rand due to the shutdown. Despite the US dollar weakening, Botha mentioned that there is still some risk premium present in the rand, as its value remained at the R18.50 mark.

According to Murison, even though there is a lot of risk in the air, it doesn't seem to be helping the dollar very much. There's a good chance, around 47.6%, that the US won't increase interest rates at their upcoming meeting on Wednesday.

The focus of the market is currently on the potential acquisition of Credit Suisse, Switzerland's second-biggest bank, by UBS, the country's largest bank, as a measure to prevent a banking crisis. On Monday, Credit Suisse experienced a decline of almost 60% in shares, while UBS suffered a loss of over 6%.

The most prominent updates related to commerce, finances, and market trends for the day.

On Monday morning, Ipek Ozkardeskaya, a senior market analyst at Swissquote Bank, noted that the trading hours ahead would provide more insight on whether the crisis had been controlled.

The Credit Suisse crisis should not spread any further according to theory. This is because the issue that caused the last upheaval for Credit Suisse was linked to lost trust, which is not a concern for UBS – another bank that is not affected by the turbulence. Additionally, UBS has plenty of available funds and is backed by support from the Swiss National Bank and the government.

According to her, assuming everything proceeds smoothly, the unstable days that banks have faced will soon be a thing of the past and investors can shift their focus towards the decision made by the Fed.