This past month, the US markets demonstrated remarkable resilience, boosted by the resolution of the US debt ceiling debate, which heightened risk appetite among investors. The Dow Jones and S&P 500 indices both climbed by 2.5%, while the tech-heavy NASDAQ surged by an impressive 3.5%, primarily driven by strong performances in the tech sector, led by Tesla.

However, the tech sector's success was juxtaposed with challenges faced by chip manufacturers AMD and Micron Technology. Micron Technology's ban by Chinese authorities after a failed security review further strained US-China relations.

On the global front, markets remained relatively stable, closing the month with modest gains. Investors closely awaited crucial US inflation data and Federal Reserve decisions, influencing market sentiment.

The Rand exchange rate experienced a noteworthy correction, strengthening by 4.7% against the USD which negatively affected returns for domestic investors in global indices.

Amidst these dynamics, the JSE was up by 1.1 %, with the financial sector emerging 26.0 as a top performer during the period.

The month encompassed a mix of positive and challenging developments, with global events and economic factors significantly impacting market performances. As we enter a new month, investors remain cautious and vigilant, monitoring both local and international indicators, and staying prepared to navigate potential uncertainties ahead.

US

In the past month, the US markets displayed mixed performance, with investors closely awaiting the Federal Reserve's decisions. During this period, the Dow Jones recorded a modest increase of 0.5%, while the S&P 500 saw a 2.5% rise. The NASDAQ was up 3.5% and remained relatively stable throughout the month. The standout performer during this period was Tesla, surging impressively by 14%, along with other automotive manufacturers, after announcing a collaboration with General Motors for the use of Tesla's charging infrastructure and technology.

Tech stocks experienced significant rallies, leading to profit-taking in some major tech companies. Nevertheless, the overall market trend continued upward, with gains from tech giants like Oracle and Adobe, as well as home builder Lennar, as they released their financial results.

Energy markets faced volatility due to Saudi Arabia's announcement of substantial production cuts during OPEC meetings, leading to a 4% decrease in crude oil prices.

Overall, the U.S. markets have witnessed a mix of positive and negative movements in the recent weeks, influenced by factors such as the Federal Reserve's decisions, corporate earnings reports, and geopolitical events impacting the energy markets. Investors continue to closely monitor developments in various sectors to make informed decisions in this dynamic market environment.

South Africa

South African equity markets experienced fluctuations throughout the week but ultimately closed on a positive note due to strong global market performances. Most sectors saw gains, with the financials sector leading the way.

One notable decliner was Spar, which fell by 27% after issuing guidance indicating lower expected earnings. The struggling retailers in South Africa attributed their challenges to increased operational expenses, particularly the rising cost of diesel to mitigate power outages. Pepkor and Tiger Brands were among the companies impacted, leading to lower headline earnings despite revenue increases.

In contrast, Nedbank published a strong business update, focusing on the search for a successor to their CEO, Mike Brown, who is set to retire.

Premier Group, a fast-moving consumer goods company, saw a gain of 4.5% driven by a remarkable 23.4% increase in revenues and a 22.7% rise in headline earnings per share in their recent annual report.

Renergen, an emerging energy company, had an outstanding performance with an 18% increase. The company secured conditional approval for a $500 million senior debt package in the US and a $250 million debt facility from Standard Bank, positioning them favourably for the second phase of their development and planned listing on the US markets.

Gold stocks faced downward pressure, and packaging company Mondi PLC experienced a 7% decline after the failure of a deal to sell a Russian asset, prompting the company to search for a new buyer.

Notable performers for the period included Naspers (+3%), Vodacom (+5%),  MTN (+4%), and  Telkom (+20%). However, gold and platinum stocks underperformed. Impala Platinum increased its stake in Royal Bafokeng Holdings to 56%. Afrimat rose by 9.6%, driven by their announcement of acquiring cement giant Lafarge from Holcim, valued at R1.4 billion.

Mr Price faced challenges, with a decline in some store sales by 3.4%, and the energy crisis in South Africa negatively impacting their results.

Omnia, a chemicals company, reported positive results with revenue growth of 24% and increased operating profits and headline earnings per share. However, their stock price dropped by 8.8% despite implementing a share buyback program due to strong cash generation.

The gold and platinum sectors continued to suffer losses, with spot platinum prices experiencing a significant drop, leading to substantial double-digit losses for key players such as Anglo-American Platinum (-17%) and Impala Platinum (-17%). Additionally, there was a broader sell-off in the resources sector, with companies like Kumba Iron Ore (-11%) and Sasol (-11%) experiencing sharp declines.

Namibia

During the past month, the Namibian markets showed mixed performance, with some sectors outperforming and others facing profit-taking and losses. Notably, Nictus Holdings experienced a substantial 16% increase following the release of positive results. However, the finance sector in general faced challenges, with Standard Bank Namibia and other finance stocks experiencing profit-taking.

Global trends influenced the Namibian stocks, with the NSX overall index up by 2.4% in the month. There were strong performances from financial services companies. FirstRand Namibia increased by an impressive 12%, while Capricorn Group and Letshego Holdings also experienced gains of 5.7% and 4%, respectively. Conversely, Trustco Holdings remained at the forefront of losses, facing a significant decline of 17% over the month.

The NSX local index remained unchanged due to pressure from losses in telecoms and financial stocks. Tadvest continued to underperform, extending its losses from the previous weeks with a drop of 2.2%.

Overall, the Namibian markets displayed a mixture of positive and negative performances, with the financial sector playing a crucial role in driving gains and losses. Investors closely monitored company results and global market trends, contributing to the market's fluctuations. As the month concludes, market participants will continue to observe how economic factors and corporate developments shape the performance of the Namibian markets in the upcoming months.

Economic

In June, economic data worldwide remained relatively subdued. The manufacturing sectors in both the US and Germany showed marginal downside surprises, aligning with the observed trend in manufacturing PMI data. China experienced a decline in export and import volumes in May, with exports seeing a substantial decrease. Chinese inflation unexpectedly flattended in June, mainly due to a decline in non-food prices and transport and remained lower compared to global trends on a year-on-year basis. Meanwhile , the Eurozone faced a negative growth of -0.1% in revised GDP estimates for Q1, potentially signalling a technical recession.

US

The US Senate successfully passed legislation to raise the government's debt ceiling, leading to a rally in risk assets. Positive news emerged from the US jobs data, with better-than-expected nonfarm payrolls for May. However, average hourly earnings and an uptick in the unemployment rate provided some counterbalance.

The spotlight in June was on US inflation data and the US Federal Reserve's decision. The US inflation rate for May declined to 4% year-on-year from the previous 4.9%, marking the lowest level since March 2021 and a significant decrease from the peak of 9.1% approximately a year ago. The decline in inflation was driven by moderating food and fuel prices. Core inflation also moderated from 5.5% to 5.3%.

The US Federal Reserve decided to maintain the Fed funds rate at 5.25%, which aligned with market expectations. However, the Fed's commentary indicated a slightly more hawkish stance than anticipated, possibly affecting market sentiment during the weaker Friday session. The Fed projected the possibility of future rate hikes after this pause, emphasizing that the pause would allow them to assess the impact of the ten consecutive rate hikes implemented in the current cycle. Federal Reserve Chair Jerome Powell's remarks about further interest rate hikes before the year's end caused concerns about a potential recession, leading to a shift in market sentiment after the Fed's previous decision to keep rates unchanged.

The Federal Reserve stressed its data-driven approach, indicating that decisions would be made on a meeting-by-meeting basis. Inflation remained above the 2% target level, prompting policymakers to consider real interest rates in light of moderating inflation data.

Positive US housing starts and building permits figures were reported in June, reflecting strength in the housing sector. On the other hand, Japan saw disappointing inflation numbers, highlighting the divergent stances of the two central banks, with the Bank of Japan maintaining an accommodative monetary policy.

Flash manufacturing Purchasing Managers' Index (PMI) data indicated a further economic slowdown across multiple regions in June, adding to concerns about the global economic outlook.

Overall, June witnessed mixed economic data globally, with attention focused on inflation trends, interest rate decisions, and central bank policies. The markets experienced high volatility, responding to comments from the US Federal Reserve Chair Jerome Powell and other economic indicators. Investors remain cautious amid uncertainties in the global economic landscape.

Europe and UK

In June, the  European Central Bank (ECB) announced a decision to raise its interest rates by 25 basis points, bringing the policy rate to 4%. This marked the eighth consecutive rate hike in the region, although the ECB's rate hike cycle lagged behind that of the US. The move came as inflation levels in developed markets continued to stay significantly above the target level of 2%. Policymakers are closely monitoring inflation data as it is expected to moderate in the coming months. With this rate increase, the ECB aims to strike a balance between controlling inflation and supporting economic growth in the Eurozone.

Surprisingly, the Bank of England (BOE) implemented a more aggressive monetary policy tightening in June. The  BOE raised its policy rate by 50 basis points to 5%, which was double the anticipated 25 basis points hike. This decision was driven by concerns over the stickier-than-expected Consumer Price Index (CPI) in the UK, which stood at 8.7% year-on-year in May. The soaring inflation rate prompted the BOE to take swift action to address the inflationary pressures in the economy. The central bank aims to rein in inflation and stabilize the UK's economic outlook while being mindful of the potential impact on borrowing costs and consumer spending.

In developed markets worldwide, inflation levels remained elevated, significantly surpassing target levels . The persistent high inflation rates have led central banks to focus on real interest rates and their implications on the economy. Policymakers are closely monitoring inflation data to gauge the appropriate level of interest rates going forward. As inflation is expected to moderate in the coming months, central banks are taking a cautious approach to balance economic growth and price stability.

The interest rate decisions by the ECB and the BOE had notable impacts on the global financial markets. Investors responded to the rate hikes with heightened attention, closely analysing the implications for various asset classes and sectors. While the ECB's rate hike was in line with market expectations, the BOE's larger-than-expected increase surprised many market participants, leading to fluctuations in asset prices and increased market volatility.

Emerging Markets

In June, China’s total social financing, a measure of liquidity, increased by CNY 1.5 trillion, which fell slightly below market expectations. The People’s Bank of China responded by lowering the 1-year Medium Term Loan financing rate by 10 basis points and indicated the possibility of further moves with the Prime rate. The market anticipates additional stimulus measures from China as the country continues to address economic challenges and support growth. China’s efforts to boost liquidity and stimulate its economy are being closely monitored by the market, as further stimulus measures are anticipated.

South Africa

In June, South Africa's inflation data revealed a year-on-year CPI increase of 6.3% which was below the 8.0% recorded in May and below consensus estimates. The slowdown in food inflation and lower oil prices contributed to the deceleration in transport inflation. Core inflation, which excludes food and fuel, stood at 5.2%. Despite the slight decline, inflation was still above the upper end of the South African Reserve Bank's target range of 3-6%, leading to the central bank maintaining its hawkish stance to control inflationary pressures.

 On the domestic front, economic data in June revealed a rise in private sector credit, indicating potential increased borrowing and economic activity. However, the manufacturing sector continued to face challenges and remained in contraction. New vehicle sales, on the other hand, saw a strong increase, possibly reflecting improved consumer confidence.

The release of South Africa's Q1 2023 GDP data was a major highlight for local investors. The economy grew by 0.4% quarter-on-quarter, indicating a slight recovery from the previous quarter's downwardly revised -1.1% contraction. This growth narrowly helped the economy avoid a technical recession but was primarily attributed to a low base effect from the previous quarter rather than a strong overall performance. On an annual basis, growth slowed to 0.2%, the slowest pace since the beginning of 2021, aligning with forecasts of flat growth for the year.

There were some positive signs in South Africa's trade and manufacturing sectors. The current account deficit narrowed in Q1 2023, mainly driven by a surge in the trade surplus resulting from increased exports. Additionally, manufacturing production saw a surprise uptick of 3.5% in April, the first gain since October 2022. However, business confidence continued to decline, reaching its lowest level since the pandemic. Ongoing energy challenges impacted investment and growth prospects, posing further challenges to the economic recovery.

South Africa's economic performance in June showcased a mixed picture. Inflationary pressures remained a concern for policymakers, leading to a continued hawkish stance by the central bank. While positive developments were seen in trade and manufacturing, overall economic growth remained sluggish, with business confidence affected by energy constraints. As the global and domestic economic landscape continues to evolve, authorities and investors will closely monitor economic indicators to gauge the trajectory of South Africa's recovery and implement appropriate policies to foster sustainable growth.

The global economic outlook remains uncertain, with various factors influencing growth trajectories and inflation dynamics. Central banks will continue to closely monitor economic data, particularly inflation trends, and adjust their monetary policy strategies accordingly. The focus will be on striking a delicate balance between supporting economic growth and addressing inflationary pressures to ensure a stable and sustainable recovery in the global economy.

Overall, June witnessed significant monetary policy actions by central banks, reflecting the ongoing challenges posed by inflationary pressures. As central banks take measures to tackle inflation, the financial markets are expected to remain sensitive to policy developments and economic indicators in the coming months. Investors should remain vigilant and adapt their strategies to navigate the evolving economic landscape.

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