Key economic indicators to be released keep financial markets uncertain - Chris Harmse

Financial markets domestically and around the globe performed mixed but nervously last week. Markets await the release of the US non-farm payrolls for November, of which the date remains uncertain, and the decision by the Federal Reserve’s Foreign Open Market Committee (FOMC) next week (10 December) on interest rates before decisions on risky assets will be taken.

These key indicators will weigh heavily on equity, bond rates, and foreign exchange rates for the rest of December. A further 25 basis points cut by the FOMC would be the third consecutive lowering of its bank rate since its September meeting. Analysts and investors are raising their expectations for lower rates after New York Fed President John Williams commented last week that there was room for “a further adjustment in the near term to the target range for the federal funds rate”

In reaction to this improved sentiment for risky assets US Wall Street started to improve at the end of last week. The heavy tech weighted Nasdaq on Friday advanced its fifth consecutive day of gains, improving by 0.65%, and ended higher for the week by 4.9% even as it recorded a losing month of -1.9%. The Dow Jones industrial index shot up last week by 3.9%, while the broader S&P500 index ended the week 3.2% higher, and managed to close for the month in the green.

Share prices on the JSE mostly moved sideways but ended the week mostly stronger. The All Share index gained 1.2% over the week, ending the month with 0.7% higher. Industrial shares (IND25) lost -3.2% over the last seven days, while finical shares (Fin15) traded down by -1.7%. The recovery in the prices for precious metals like the gold price ($156) to $4 210 per ounce, the price for platinum ($167) to $1 675 and palladium ($173) to $1 465 per ounce, helped the resource index (RES10) to shoot up by 2.4% on Friday.

The rand continues to appreciate, pushing fuel prices lower.

The exchange rate of the Rand in line with other risk assets recovered strongly last week as foreign buying interest in shares and bonds improved together with the sharp increase in precious metal prices. Against the US dollar the Rand won 19 cents last week to close Friday on R17.11 per dollar. For the month of November, it improved from R17.33/$ on 1 November to R17.04/$ on 13 November and closed a bit weaker on Friday. Against the Pound, the Rand moved mostly sideways last week as well as over most of the month of November, from R22.79/£ on 31 October to R22.66/£ on Friday.

Given the stable lower price for Brent crude oil around $63 per barrel during November and the stronger Rand it is expected that fuel prices will be decreased by the Central Energy Fund this coming Wednesday. It is anticipated that the price for 95 octane Petrol will be lowered by 26 cents per liter to and that of Diesel by 60 cents per litre. In the case of petrol, the lower price at R20.86 per litre in Gauteng represents a 61 cents per litre decrease over last December (R21.47). For diesel, the projected new price of R18.52/litre in Gauteng represents a drop of 69 cents per litre. Together with the expected drop in other import prices, the inflation rate in December may move closely to the 3.0% inflation target of the Reserve Bank. If the US FOMC cuts its bank rate again next week, the changes will increase so that the Monetary Policy Committee is likely to lower the repo rate during its first meeting in February 2026.

Prospects for this coming week

This coming week financial markets worldwide will await the release on the US personal income and expenditure figures on Friday. Together with the inflation rate for December and January it will indicate the probability of another rate cut by the FOMC in January 30-31 next year (2026). The lack of non-farm payrolls release over the last three months makes the FOMC decision more difficult. Elsewhere the Euro Area will release its unemployment rate for quarter three on Tuesday and its third GDP growth rate for quarter three (Q3) on Friday.

Domestically, the Reserve Bank will publish the current account balance for Q3, and it is expected that the deficit had shrunk from -R82 billion in Q2 to -R32bn in Q3. The RMB/BER business confidence index in South Africa eased further to 39 in Q3 2025, the lowest since Q3 2024, from 40 in the prior period. The Q4 estimate will be released on Wednesday and is expected to have decline further to 37.

Chris Harmse is the consulting economist of Sequoia Capital Management and a senior lecturer at Stadio Higher Education.

*** The views expressed here do not necessarily represent those of Independent Media or IOL.

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