Market commentary

The local bourse had a great start to the week, adding 1.36% to finish at 77 746 points, after four consecutive sessions of declines, as investors evaluated the national elections results. Although the ANC fell short of securing enough votes for sole governance, reports confirmed ongoing negotiations with the DA to establish a coalition. Local reports indicated that the possibility of a coalition with the MK "is rapidly diminishing," especially after ANC secretary-general Fikile Mbalula asserted on Sunday that the party would not compromise its president in exchange for a coalition agreement. In corporate news, financials emerged as the top gainers, surging by nearly 4%, while sectors tied to resources fell by 1.30%. At 18h00, the rand had strengthened 1.11% to R18.53/$, 0.89% to R20.16/€ and 0.76% to R23.76/£.

Wall Street traded lower on Monday, with the S&P 500 down by 0.40%, the Nasdaq retreating 0.10%, and the Dow Jones shedding over 300 points after the ISM Manufacturing PMI revealed a larger-than-expected decline in US manufacturing activity. While the underwhelming data increases the likelihood of interest rate cuts, it also signals a deteriorating US economy. Sectors heavily reliant on economic growth, such as banks and industrials, led the downturn alongside other shares. Investors are now focussed on upcoming economic data releases later in the week, including May’s employment report, JOLTS, and the ISM Services PMI.

European stocks were buoyant on Monday, with the STOXX 50 index climbing 0.40% to surpass the 5 000 milestone. Leading this uptrend were prominent companies such as LVMH, ASML Holding, SAP, and Linde, registering gains ranging from 0.50% to 1.30%. The broader STOXX 600 index also saw growth of 0.30%, supported by strong performances in the construction sector, while healthcare stocks lagged. Investor focus has now turned to the European Central Bank's imminent interest rate decision later in the week, with widespread expectations of a rate cut.

Asian stocks traded in mixed fashion on Monday, with the Shanghai Composite falling 0.27% to settle at 3 078 points, while the Shenzhen Component rose 0.07% to reach 9 370. Despite positive manufacturing PMI data in China, mainland stocks struggled to find momentum. A private survey indicated that Chinese manufacturing activity expanded at its quickest pace in nearly two years in May 2024, contradicting official data released the prior week, which indicated an unexpected contraction. Additionally, reports surfaced suggesting that the US and its allies might take action against Chinese firms and banks due to Beijing's support for Russia's actions in Ukraine - adding to investor jitters.

After registering a 3% decline, Brent crude fell below $79 per barrel, its lowest point in four months. This came after OPEC+ outlined a gradual plan to ease some of its oil production cuts. Trading Economics reports that: “The group aims to gradually phase out voluntary production cuts of 2.2 million barrels per day over the next year, starting in October. By December, it anticipates reintroducing over 500 000 barrels per day into the market, with a total of 1.8 million barrels per day returning by June 2025. Additionally, OPEC+ plans to maintain supplementary production cuts of 3.6 million barrels per day until the conclusion of 2025.”

Monday saw a modest increase in gold prices to $2 340 per ounce, closing 3.50% below the record high and slightly above the two-week low of $2 330 recorded during the previous session. This increase was driven by growing predictions of looser monetary policies by major central banks, which increased demand for non-yielding bullion.