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Johannesburg - The rand and stocks weakened on Friday after weaker-than-expected US jobs data fuelled worries about the global economy, sending investors to safe haven assets like gold.
Fixed income government bonds - generally safer than stocks and currencies - gained, the yield on the benchmark 2015 bond hitting record lows at 6.32%.
The rand weakened in line with other emerging market currencies, hitting session lows at R7.08/$.
It was trading at R7.06/$ in early evening trade, 0.6% weaker than Thursday’s New York close of R7.00/$.
“Risk currencies suffered after the US data and the rand is not immune. There is a lot of concern for the developed world and the global market in general,” said Garth Klintworth, head of fixed income commodities and currencies at Absa Capital.
The R7.08/$ level is strong support for the rand and its breach could signal further losses. The rand is off three-week highs of R6.9656/$ hit on Thursday.
On bonds, the yield curve has flattened by 40 to 50 basis points on across the curve as the local market sees a chance of a rate cut given the weakness in the global and domestic economy.
Soft gross domestic product numbers for the second quarter only added to rate cut hopes this week.
Should July’s manufacturing numbers - due for release next week - point to a further slowdown in the third quarter, bond yields will likely fall further.
The yield on the 2015 bond came back to 6.365%, 5.5 basis points down from Thursday’s close. The yield on the 2026 note fell six basis points to 7.97%, also up from the session low of 7.86%.
Reserve Bank governor Gill Marcus’ comments last week that the bank would “act appropriately” in the even of a significant global slowdown bolstered expectations of a rate cut.
Stocks dip
On the bourse, stocks had the biggest dip in two weeks in a knee-jerk reaction to US jobs report, but gold miner firms fared better as investors took to safer havens.
JSE’s Top 40 - (Tradeable) [JSE:J200] blue-chip index surrendered over 2% and the broad-based All-share index gave up 1.83%.
The gold mining index added 2.1%, with Harmony Gold Mining Company [JSE:HAR] adding 3.4% to R96.75.
“Due to fact that these figures were below expectations, the market reacted negatively. One has to take into account that the market had a huge rally, so we are better off than where we were a few weeks ago despite these bad numbers,” said Ferdi Heyneke, a portfolio manager at Afrifocus Securities.
“We have already danced quite a bit, so on the back of that we’ve had consolidation and profit taking.”
US non farm payrolls stagnated last month as falling consumer demand discouraged already skittish business from taking on new staff, adding to worries about the economy's health.
The figures will now pile more pressure on the US Federal Reserve to provide additional monetary stimulus.
“It’s going to depend on what they do now, what they say on the fed side which might change the direction of the market again,” Heyneke said.
Big losers included petrochemicals group Sasol, which fell 3.80% as oil prices retreated on the renewed US recession fears.
Fixed income government bonds - generally safer than stocks and currencies - gained, the yield on the benchmark 2015 bond hitting record lows at 6.32%.
The rand weakened in line with other emerging market currencies, hitting session lows at R7.08/$.
It was trading at R7.06/$ in early evening trade, 0.6% weaker than Thursday’s New York close of R7.00/$.
“Risk currencies suffered after the US data and the rand is not immune. There is a lot of concern for the developed world and the global market in general,” said Garth Klintworth, head of fixed income commodities and currencies at Absa Capital.
The R7.08/$ level is strong support for the rand and its breach could signal further losses. The rand is off three-week highs of R6.9656/$ hit on Thursday.
On bonds, the yield curve has flattened by 40 to 50 basis points on across the curve as the local market sees a chance of a rate cut given the weakness in the global and domestic economy.
Soft gross domestic product numbers for the second quarter only added to rate cut hopes this week.
Should July’s manufacturing numbers - due for release next week - point to a further slowdown in the third quarter, bond yields will likely fall further.
The yield on the 2015 bond came back to 6.365%, 5.5 basis points down from Thursday’s close. The yield on the 2026 note fell six basis points to 7.97%, also up from the session low of 7.86%.
Reserve Bank governor Gill Marcus’ comments last week that the bank would “act appropriately” in the even of a significant global slowdown bolstered expectations of a rate cut.
Stocks dip
On the bourse, stocks had the biggest dip in two weeks in a knee-jerk reaction to US jobs report, but gold miner firms fared better as investors took to safer havens.
JSE’s Top 40 - (Tradeable) [JSE:J200] blue-chip index surrendered over 2% and the broad-based All-share index gave up 1.83%.
The gold mining index added 2.1%, with Harmony Gold Mining Company [JSE:HAR] adding 3.4% to R96.75.
“Due to fact that these figures were below expectations, the market reacted negatively. One has to take into account that the market had a huge rally, so we are better off than where we were a few weeks ago despite these bad numbers,” said Ferdi Heyneke, a portfolio manager at Afrifocus Securities.
“We have already danced quite a bit, so on the back of that we’ve had consolidation and profit taking.”
US non farm payrolls stagnated last month as falling consumer demand discouraged already skittish business from taking on new staff, adding to worries about the economy's health.
The figures will now pile more pressure on the US Federal Reserve to provide additional monetary stimulus.
“It’s going to depend on what they do now, what they say on the fed side which might change the direction of the market again,” Heyneke said.
Big losers included petrochemicals group Sasol, which fell 3.80% as oil prices retreated on the renewed US recession fears.
