JSE Jan - May 2018
JSE Jan - May 2018The first half of 2018 will be remembered for extreme volatility in global markets fuelled by political events, a good example being last week’s response of the markets to political instability in Italy.
It is hard to believe the year is nearing its official halfway mark of 2 July 2018. The first half of 2018 will be remembered for extreme volatility in global markets fuelled by political events, a good example being last week’s response of the markets to political instability in Italy.
A chaotic week in Italian politics – and markets – ended with the much-awaited formation of an anti-establishment government. The rejection of an anti-euro candidate for finance minister caused the alliance between the 5-Star Movement and the League to collapse early in the week, leading to speculation that early elections would be called. Investors viewed any snap election as a de facto referendum on Italy’s membership of the European Union (EU) and the single currency, which sent Italian asset prices spiralling lower on Tuesday. However, markets recovered later in the week. Party leaders have in recent days stressed that they do not want to leave the EU, which helped calm the markets.
Looking back over the first six months of 2018: the local JSE all-share index (ALSI) lost 2.45% in value. The industrial sector (being the largest sector on the market) lost 6.06% in value, the financial sector ended 3.44% lower, while the resources sector closed 13.44% up. A major news story affecting local markets over the period was the performance of the listed property sector, which closed 14.89% lower on the back of the Resilient Group scandal. The rand lost 2.55% in value against the US dollar, although the extremely volatile trading was mostly influenced by external factors.
Inflation hit its lowest point in years and turned on 4.8% in April. This with the result of an improved political outlook and caused a rally in the bond market. The all-bond index closed 10.76% higher for the review period.
Unfortunately, for local consumers the price of Brent crude oil strengthened further and is currently trading at around $76.60 a barrel, from a position of $66.5 at the beginning of the year. This, and the weakening rand, had a direct impact on the price of petrol and diesel, which will again increase this week. Both grades of petrol, 93 and 95, will increase by 82c a litre on Wednesday. The price of diesel 0.05% sulphur and diesel 0.005% sulphur will rise by 85c and 87c a litre respectively.
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