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Rand tumbles as Zuma stays put

Cape Town – SA bonds and the rand fell further on Wednesday after the announcement by ANC secretary general, Gwede Mantashe, that the ruling party would not recall President Jacob Zuma.

The announcement was made after an extended meeting of the ANC’s National Working Committee, whereby it emerged that the ANC would not pressure Zuma to resign.  

The decision by leaders within the ANC to back Zuma, further entrenches his position and increases the probability of him surviving an opposition-sponsored vote of no confidence in parliament.  

The news of Zuma’s survival saw the rand tumble 2.8% to R13.86/$ from the intraday high of R13.47/$.  

Should there be no change to the current ANC set up with Zuma at the helm, the remaining investor confidence in local business may be squeezed out of the market.  

The JSE extended its gains at the close of trade on Wednesday as the weaker rand bolstered resources and rand hedge stocks.  At the close of the JSE the rand was trading at R13.77 to the greenback.
 
Shares in Lonmin jumped 32.81% to R19.35 per share, as the miner capitalised on a firmer rand platinum price, which has risen +10% in recent weeks. In terms of the market movements for the day; the blue chip JSE Top 40 gained +0.84%, whilst the broader All Share Index firmed +0.56% up.  

At the close of the JSE, the Resources Index firmed +3.57% whilst the Industrial Index closed +0.33% higher.  The banks faced further weakness as the Financial Index sank -1.80% lower.


South African economic data

Data out of SA shows that new vehicles sales growth increased 2.1% year-on-year in March, with sales of heavy commercial vehicles being the key driver of the increased sales.  The Standard Bank South African PMI data rose to 50.7 in March, from 50.5 in February, indicating that private sector output increased for the seventh successive month, the longest sequence of growth in four years.  

The SACCI business confidence index for South Africa pulled back to 93.8 from 95.5 in February 2017.  The weakened business confidence can be attributed to the recent developments in the political economic space.  Key risks to confidence are a vulnerable rand exchange rate which puts pressure on inflation as well as further political event risk.
 
International markets
 
The S&P500 jumped +0.66% in early trade on the back of strong US private employment figures.  The positive US ADP non-farm payrolls rose by 263 000 in March surpassing forecasts for an increase of 187 000.  The data released by ADP is a precursor to the key non-farm payrolls report released as part of the Non-Government Jobs Report due on Friday, April 7.  Job creation has been the foremost topic of the Trump campaign.
 
The positive news moved the 10-year treasury yield up two basis points to 2.37% and the US dollar index by +0.1%, which is a measure of the value of the greenback against a basket of six major rivals which includes; the euro, Japanese yen, Canadian dollar, British pound, Swedish krona and Swiss franc.
 
Commodities

Brent Crude Oil hit a one-month high as it climbed for a second day, rising 66 cents to $54.82 per barrel on the news of a supply outage in the United Kingdom’s North Sea. Bullishness in oil has been driven by a decrease in US crude inventories supported by an Opec supply cut, with expectations that the agreement to cut production is to be extended.

Gold slipped 0.6% to $1248/Oz as the strong US jobs data is seen as increasing the changes of further Federal Reserve interest rate hikes, and thus a firmer US dollar.

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

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Rand - Dollar
18.94
-0.2%
Rand - Pound
23.91
-0.1%
Rand - Euro
20.43
+0.2%
Rand - Aus dollar
12.34
+0.1%
Rand - Yen
0.13
-0.2%
Platinum
910.50
+1.5%
Palladium
1,011.50
+1.0%
Gold
2,221.35
+1.2%
Silver
24.87
+0.9%
Brent-ruolie
86.09
-0.2%
Top 40
68,346
+1.0%
All Share
74,536
+0.8%
Resource 10
57,251
+2.8%
Industrial 25
103,936
+0.6%
Financial 15
16,502
-0.1%
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