Market commentary

That actions have consequences has perhaps never been more clear, as the ripple effects of the George Floyd protests in the US are still being felt across the globe, while the decisions made by governments during the pandemic continue to impact billions of lives and livelihoods. Significantly, it is therefore worth considering that with protectionism on the rise in the global political landscape, we seem to be leaving globalisation further and further behind – and that events on the other side of the world will inevitably effect changes even here in South Africa.



Markets have become more cautious over the past week as a result of the Federal Reserve’s grim outlook on the recovery of the US economy, with emerging markets and their associated currencies bearing the brunt. The challenges currently facing the US economy are not, however, solely a function of the Covid-19 lockdown.

Economies around the world began experiencing a slowdown in growth as early as 2018, with global trade increasingly coming under threat. The geopolitical landscape has never been a stranger to military conflict, but economic warfare is also becoming increasingly commonplace, with more and more governments imposing tariffs, quotas and regulations in an attempt to capture a larger piece of the pie.

Additionally, while we are all too familiar with US-China animosity, there are numerous other conflicts at play across the globe. For example, this week saw the decades-long China-India standoff over the disputed Himalayan border turn deadly, claiming the lives of 20 soldiers. Likewise, North and South Korea are also less than friendly neighbours, with North Korea blowing up a key joint liaison office on Tuesday. North Korea explained its actions by referring to South Korea as a “mongrel dog” and accusing it of being in the “noose” of the US.

Notably, both India and China have confirmed nuclear capabilities, while North Korea’s nuclear programme remains largely shrouded in mystery. Consequently, any violent escalations in the aforementioned conflicts poses a threat to all countries.

Meanwhile, Covid-19 cases are now expected to increase once again in the US and globally as a result of mass protests, with millions having disregarded social distancing protocols to take to the streets. This in turn has raised the concern that governments may reimplement lockdowns in order to flatten the curve of a second wave. China, for instance, has now reintroduced partial lockdowns in Beijing, as a cluster outbreak sparked renewed fears over the spread of the virus.

There have been no surprises from a data perspective, but in one key event, Federal Reserve Chairman Jerome Powell stated that the Fed will engage in purchases of corporate bonds as an additional weapon in their stimulus arsenal.


  • Retail sales are slowly recovering, with the year-on-year contraction for May coming in at 6.1%, versus a contraction of 19.9% seen in April
  • Both industrial and manufacturing production turned positive in May, reaching 1.4% and 3.8% respectively month-on-month
  • Initial jobless claims are not reducing at the pace initially anticipated, reaching 1.5 million for the week


  • Unemployment remained steady at 5.9%
  • Industrial production accelerated 4.4% year-on-year in May
  • Retail sales remain subdued, contracting 2.8% year-on-year in May
  • Fixed asset investment is still feeling the pinch, declining 6.3% year-on-year in May
  • Foreign Direct Investment improved in May, but remains in the red at -3.8%


  • CPI remained flat year-on-year for May at 0.1%


  • Unemployment remained flat at 3.9%, outperforming market expectations
  • CPI ticked up marginally month-on-month to 0% in May from the previous -0.2%, while declining to 0.5% year-on-year
  • BOE kept interest rates at 0.1%



South Africa celebrated Youth Day on Tuesday. With youth unemployment expected to reach 53.8% in 2020, and 58% in 2021, the question of what can be done to change the narrative is now urgent. We have seen many protests demanding free tertiary education, and while access to education is undoubtedly essential for a more secure future for our youth, these qualifications are largely meaningless without employment opportunities.

Meanwhile, the threat to job security has intensified, as lockdown measures taken by government have seen many become unemployed. Unfortunately, many of those jobs will be lost forever, and will not become available again once the lockdown is fully lifted.

This said, President Ramaphosa announced the further relaxation of lockdown regulations this week. This will see many in the beauty industry return to work, after being unable to earn an income for almost three months. The amended regulations will also see some tourism activities resume (for local purposes at least), with some accommodations, movie theatres and casinos reopening. While the exact extent of the relaxations is still to be made public, this will come as a welcome relief to employers and employees alike.

However, while South Africans are anxious to resume their normal lives, the number of Covid-19 cases will continue to rise, and hospitals will inevitably come under strain. The actions of each citizen will thus determine the fallout of the pandemic in the coming months.



The week ahead will see markets paying close attention to the increase in Covid-19 numbers, as well watching for any indication that other countries will follow China’s example by entering partial lockdowns to combat cluster outbreaks.

We will also be paying attention to the local data due for release in the coming week. The highly anticipated unemployment rate, which has been postponed twice since entering lockdown, as well as local CPI is bound to set the course for potential SARB and government interventions in a bid to stabilise the fragile economy.

We will also be keeping an eye on the following data releases in the week ahead:


  • CN PBoC loan prime rate


  • EU manufacturing and services PMI
  • UK services and manufacturing PMI
  • Local unemployment
  • US services and manufacturing PMI


  • Local CPI and retail sales


  • Local PPI
  • US GDP
  • US jobless claims

The rand started the day at R17.48/$, R19.59/€ and R21.70/£.


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