Market commentary

In recent months, we have seen the US engage China in one of the biggest trade spats of our time. However, the US’ focus on China has now taken a back seat to the country’s internal racial divisions, which have been laid bare over the past few days.

In particular, the issue of racial profiling by law enforcement has been thrust to the forefront of global news by the police killing of George Floyd, stirring racial tensions to new highs and sparking a series of violent protests. As many are drawing parallels between current events and the 1960’s civil rights movement, it seems appropriate to recall the words of Martin Luther King as he once said, “Injustice anywhere is a threat to justice everywhere.”



The US police force has long been accused of racial bias and unwarranted brutality towards certain races, and especially African Americans. On top of this, the thousands of deaths and economic fallout caused by Covid-19 have taken a severe toll on the nation’s mood. In recent weeks, the US economy, in line with the rest of the world, has witnessed economic devastation. Now at the highest levels seen since the Great Depression, unemployment has skyrocketed from 3% to 20%, plunging millions of people into financial turmoil, and creating a tinderbox situation.

Then, on Monday 25 May, the death of George Floyd proved to be the final straw. Fears of contracting the coronavirus seemingly evaporated as thousands of Americans took to the streets to protest racial injustices. Unfortunately, these protests quickly turned violent, and images of a country on fire made their way around the globe. Many lives have since been lost and innocent bystanders caught in the crossfire, while livelihoods have been burned to the ground.

With the future of the US hanging in the balance, conspiracy theories are rapidly spreading, with some even accusing the Democrats of funding the riots as an election tactic. Meanwhile, President Trump has been insistent on fighting fire with fire, sending shockwaves through political realms with the statement, “When the looting starts, the shooting starts.”

However, Trump’s aggressive stance seems only to have incited further anger and resentment. And the damage caused by the current riots could very well see the US struggle to regain economic momentum, ultimately resulting in a delay to the global economic rebound. So, with the US national elections around the corner, markets will be watching closely to see who the country will choose to lead them, how long the US economy will take to rebound, and how these events may impact the rest of an already fragile global economy.

Then, turning to Europe and the UK, Brexit talks have reclaimed the spotlight this week. There has been little progress on this front, as German Ambassador Michael Claus explained that the UK will have to give up some of its sovereignty if it wishes to reach a free trade pact with the EU.

With negotiations in a deadlock, there are concerns that unless the UK becomes willing to take a more realistic approach, the talks may extend into October. Failure to reach an agreement by 31 December would mean the return of tariffs and quotas, and the imposition of bureaucratic barriers for businesses. With the prevailing assumption being that the UK will not request an extension of the transition period, an agreement needs to be reached in the next six months to avoid the fallout of a “no-deal” Brexit.

Yet despite growing fears over the situation in the US, the prospects for the global post-pandemic recovery, and rising risk factors such as geopolitical tensions, financial markets have remained largely upbeat. Optimism over economies rebooting, coupled with the enormous amount of cheap money in circulation due to record amounts of stimulus, has fuelled yet another rally in emerging markets and underlying risk assets, seeing safe haven assets come under pressure.

Economic data has been pushed to the back burner for the time being, but will soon enough prove its relevance, especially as most global data shows signs of a steady uptick in economic activity.


  • ISM Manufacturing PMI improved to 43.1 points in May, while ISM non-manufacturing PMI improved to 45.4 points
  • Total vehicle sales rose to 12.2 million in May, up from the previous 8.6m
  • Initial jobless claims also reduced, albeit less than expected, reaching 1.87m
  • Payrolls and unemployment numbers are a key release for the US today


  • Caixin manufacturing PMI for May ticked up above the crucial 50-point mark, while services PMI rebounded strongly from previous levels to 55 points


  • Markit manufacturing PMI improved to 39.4 points, while services PMI ticked up to 30.5 points
  • Unemployment accelerated to 7.3% in April
  • PPI contracted by 4.5% year-on-year in April
  • The ECB kept interest rates on hold


  • Markit/CIPS manufacturing PMI recovered to 40.7 points



Following an open letter from News 24 editor Adriaan Basson, which questioned why President Ramaphosa has not opened himself up to questions from the media since the declaration of the national state of disaster, Ramaphosa finally broke his media silence on Sunday, taking questions from top local editors. Questions raised ranged from the contradictory regulations witnessed throughout the various levels of the lockdown, to whether political factionalism is rife within the ruling party and the National Command Council (NCC).

The president also made waves by stating that scientific advisors counselled the NCC to take the country down to level one, but the NCC instead opted to take a more staggered approach, in line with the World Health Organizations guidelines. This has contributed to the impression that government is indeed disregarding the evidence and advice presented to them by expert advisors.

And as the number of days spent in lockdown grows, so does the amount of litigation against government challenging various sections of the regulations, including the contentious cigarette ban and even the regulations as a whole. A judgement from the High Court then ruled against the government this week, stating that the regulations under lockdown level 4 and 3 infringed on the Bill of Rights as set out in the Constitution, drawing widespread relief. While the ruling party announced that it will be appealing the judgement, and will also be extending the state of disaster by another month, the judgment went a long way to restoring faith in our constitution and democracy.

Meanwhile, the EFF called on the nation to defy the move to level 3 and to stay home, whilst promoting lectures of Marxist economic theory on its social media platforms. However, these calls fell on deaf ears, as South Africans eagerly grabbed at the opportunity to return to work and safeguard their livelihoods.

It has been a spectacular week for the rand, which has broken below R17/$. Improved risk appetite and the subsequent selloff of safe-haven assets saw the dollar dip to a seven-week low, bolstering the local currency.

There was another glimmer of hope in local data this week, as the Absa manufacturing PMI broke above 50 points in May, while total vehicle sales also regained momentum following the shutdown of the vehicle industry during lockdown. The Standard Bank PMI, however, contracted to 32.5 points.



Ongoing tensions in the US will play a critical role in dollar performance, which in turn will affect all other currencies, including the rand. Current exchange rates are relatively attractive for exchanging your hard-earned rands into foreign currency.

Unemployment numbers due for release next week are guaranteed to cause a stir, with expectations currently set at 35%. And while markets are largely driven by global events, this number may cause some commotion in the local environment.

Additionally, we will be keeping a close eye on the local government for any information regarding its appeal of the recent High Court judgement, although this process could potentially drag on for weeks, if not months.

We will also be watching for the following data releases in the week ahead:


  • US inflation expectations


  • EU GDP
  • Local unemployment
  • US JOLTs job openings


  • CN inflation and PPI
  • US inflation
  • Fed interest rate decision


  • Local gold, mining and manufacturing production
  • US jobless claims and PPI


  • UK GDP
  • EU industrial production
  • US imports and exports
  • CN vehicle sales and FDI

The rand started the day at R16.90/$, R19.15/€ and R21.27/£.


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