Rand firms, gold rallies on Trump comments

Cape Town – The rand firmed slightly on Thursday closing at R13.42 to the US dollar, while the market remained muted ahead of the Easter holiday. Comments from US President Donald Trump managed to sink the US dollar index lower, while gold rallied to its highest level of the year.

The financial sector continued its recovery, with the overall Financial Index trading 0.60% firmer led by the banks, with the Banking Index pushing 1.31% higher.  Banking stocks have taken advantage of stable bond rates, with yield on the benchmark R186 firming to 8.807% from 8.86% on Wednesday.

The blue-chip Top 40 closed -0.22% lower followed by the broader All Share Index -0.08% down. The Industrial Index softened -0.24% as the stronger rand affected the dual-listed rand hedges, while the Resources Index traded -0.46% lower. 

Mining production on the up

Local market mining production numbers for February were stronger than expected, with output rising by a seasonally adjusted 2.9% month-on-month and a 4.6% annual rate, after growing by 1.4% year-on-year in January. Improved global growth expectations have seen firmer commodity prices which has supported the higher production and export figures, however the operations in the local mining environment remains challenging.  

The chief contributors to the increase in mining production came from platinum group metals (PGM) which jumped 47.2%, and iron ore, where output bounced 20.9% off a low base.  The positive contributions offset declines in coal by -9.4%, gold by -16.8%, copper by -6.5% and nickel by -14.9%. 

Iron ore producers remain under pressure, with iron prices plunging more than 6% on Wednesday to their lowest level since November, as Chinese inventories have climbed by more than a third from H1 of last year to 134m metric tonnes.

International markets

US markets all opened weaker, following Trump’s interview with the Wall St. Journal on Wednesday causing a disruption in the markets. Trump talked down his previous stance of China as a currency manipulator and labelled the dollar as “getting too strong”.  The markets reacted swiftly on this news, with the US dollar index falling and gold pushing higher through resistance reaching $1288/Oz on Thursday. 

Crude oil traded -0.18% lower at $55.74/bbl on Thursday after weekly data indicated a continued rise in US production.  US production estimates in a weekly Energy Information Administration (EIA) report suggested domestic output continued to climb, potentially undermining the Opec-led supply cut. 

Opec is set to meet again on May 25 to debate whether to extend the current supply cut beyond June. The problem they face is as they cut supply, US and other regional competitors increase capacity to take advantage of the higher prices.

*This report is from the Trading Desk at EasyEquities, Fin24's latest content partner on equities and market moves.