Market commentary

On Monday, the local bourse experienced a decline of approximately 0.30%, closing at 78 921, its lowest level since mid-May. Traders adopted a more cautious stance in anticipation of both local elections and an impending rate decision. South Africans are scheduled to cast their votes in national and provincial elections on 29 May 2024. Forecasts suggest the ruling party, the ANC, might face the prospect of losing its majority for the first time since Nelson Mandela's leadership ushered it into power in 1994. Simultaneously, the South African Reserve Bank (SARB) is anticipated to keep its interest rates unchanged on Thursday, given that headline inflation persists above the 4.50% target, despite an unexpected deceleration in April.

The European stock markets closed with notable gains on Monday, recuperating from the previous week’s losses. Expectations of eased monetary constraints in the Eurozone gathered momentum, with the Eurozone's Stoxx 50 gaining 0.40% to 5 054, while the pan-European Stoxx 600 edged 0.30% higher to 522, remaining below its 0.50% record high this month. Anticipation mounts for the European Central Bank (ECB) to lower interest rates in the upcoming week. Investor confidence in disinflation from the ECB's Governing Council bolstered hopes of continued interest rate reductions in the third quarter.

On Monday, the dollar index hovered around 104.7, with trading volumes expected to remain subdued due to the US Memorial Day holiday. Attention shifted towards the upcoming release of the US Personal Consumption Expenditures (PCE) price index report later in the week, offering insights into the US Federal Reserve's (Fed) monetary policy trajectory. Last week, the dollar strengthened as robust US economic data tempered expectations of interest rate cuts. Moreover, the latest Fed minutes revealed that some officials would be willing to tighten policy further in the event of a surge in inflation.

Asian markets traded in mixed fashion on Monday with the Nikkei posting a 0.61% gain on Monday. Leading the gains were Furukawa Electric (6.27%), Kansai Electric Power (6.26%), and Kawasaki (5.20%). Meanwhile, the Shanghai Composite advanced by 0.20% to approximately 3 095, while the Shenzhen Component retreated by 0.40% to 9 390. Investors reacted to data indicating a 4.30% y/y increase in industrial profits in China during the January to April period. Market participants also await Chinese Purchasing Managers' Index (PMI) figures later in the week to assess the state of the world's second-largest economy.

On Monday, gold maintained its position around $2 340 per ounce, lingering close to two-week lows amid waning speculation of Federal Reserve rate cuts. Furthermore, Brent crude futures remained steady above $82 per barrel on Monday as investors refrained from making significant bets ahead of an OPEC+ meeting on 2 June 2024. Major producers are anticipated to extend voluntary output cuts through the end of this year. Earlier this month, OPEC projected robust oil demand growth of 2.25 million barrels per day for 2024, while the International Energy Agency (IEA) forecasted a more subdued growth of 1.2 million barrels per day.