Stocks on the JSE opened the week with further weakening and remained firmly at an 11-month low as geopolitical uncertainty over fears of escalation in the Middle East conflict continued to drive risk-off sentiment in the global markets.
The JSE All Share Index opened 0.7% lower at 69 676 points on Monday morning before clawing back some gains to close at a subdued 70 276 points.
Analysts said the domestic market was struggling to gain traction on the back of a potentially widening war in the Middle East and the possibility of higher interest rates for longer by the US Federal Reserve (Fed).
Israel intensified its airstrikes in Gaza and raids in the occupied West Bank at the weekend in the battle against the Hamas military group while trucks carrying much-needed aid were allowed into Palestine through Egypt’s Rafah border crossing.
Trive South Africa senior sales trader Shaun Dendere said both these global factors had a “bearish sentiment” on the JSE more than anything happening domestically.
“So what’s been really driving the markets is the geopolitical risk with the war in Israel and Palestine, which is basically giving markets a bearish sentiment,” Dendere said.
“And then the second thing that’s also really driving markets is the age-old inflation and interest rates. It seems that the Fed is still planning on increasing interest rates as we head towards the end (of the year).”
Meanwhile, the rand also remained volatile and was 0.7% weaker at R19.13 to the US dollar by noon before strengthening below the R19/$ mark to R18.93 by 5pm.
Global financial markets are in wait-and-see mode, with risk-off flows prevailing overall, adding to volatility.
Citadel Global director Bianca Botes also pointed to the Fed’s hawkish stance as the reason for the subdued rand as investors were fleeing to the safety of the US dollar.
Botes said the biggest concern for the markets was the potential fallout that the war between Palestine and Israel could really have should that conflict become more widespread in the region.
“(The rand) is really just reflecting the volatility that we are seeing in the market at the moment,” Botes said.
“The ongoing higher-rate-for-longer narrative that we’ve seen coming from central banks was really keeping the rand subdued, and it is really struggling to gain significant momentum below about the R18.70 mark. So we have seen rebounds from about R19.50 to about R18.70, and it’s really just flip-flopping at those levels as the markets try to figure out and make sense of all the different aspects that are currently impacting on markets.”