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Market Commentary | The week that was

Public strike endures: On Friday, union confederations, Cosatu, Saftu and Fedusa, warned that they will continue their strike for another day after the government’s refusal to comply with their demands for a wage hike. The threat of a renewed strike follows a march on the Treasury Office in Pretoria last week. Global rating agency Fitch announced that it has decided not to change South Africa's rating. However, the agency said, the stand-off threatens the country's debt service prospects if wage increases are approved.

Fixed Income: The major Western central banks are experiencing one of the fastest monetary tightening cycles in history. Subsequently, the escalation in long-term interest rates is wide and abrupt. A year ago, about 25% of global government debt had a negative nominal yield. Currently, bond investors can earn positive income from sovereign bonds almost anywhere, except Japan.

Interest rates increased by 325bps this year: On Thursday (24 November) the South African Reserve Bank (SARB) issued its last monetary policy statement of the year, raising the repo rate by 75 basis points (bps) to 7%, pushing it above pre-pandemic levels. The repo rate was 3.75% at the beginning of 2022 and has been increased six times by a cumulative 325 basis points. During the same course, the prime rate – the rate at which commercial banks lend to consumers - increased from 7.25% to 10.5%.

Markets: After the US Thanksgiving holiday, the dollar has recouped some of its losses, which led to a weaker rand on Friday (25 November). “The rand will remain vulnerable to uncertainty in global financial markets and, therefore, relatively volatile,” Investec analyst Annabel Bishop said. On Monday (28 November), the rand was trading at R17.14/$, R17.75/€ and R20.66/£.

Looking at the week ahead: Some key events during the week ahead: SA will be releasing its unemployment figures and trade balance; the US will be announcing its employment rate; and commentary is expected from Jerome Powell, Chair of the Federal Reserve (FED), as well as John Williams, the President and CEO of the FED.

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