Global share markets last week recorded one of their biggest sell-off since the 2008 recession.
In the US, the Dow Jones industrial index had lost 10.3% since the beginning of the current downward “correction” on January 26.
Inflation expectations and fears for huge increases in the discount rate by the Federal Reserve during this year had led to strong rises in the Fed bond yields. This had triggered a strong sell-off in equities on world markets over the last two weeks.
This negative sentiment was fuelled the previous Friday by the news that wage growth in the US had intensified in January. This indicate that US interest rates are about to increase at a faster rate than previously anticipated.
The sell-off in shares in the US had spilled over to almost all global markets. Over the same time (January26) the MSCI emerging market index had already lost 7.5% and the World index 8.5%.
World stock and capital markets are expected to stay nervous this week ahead of the release of the US inflation rate for January on Wednesday.
Expectations are that the inflation rate increased to 2.1%. This is higher than the 2% set as upper target by the Fed. If this inflation rate is attained, or is even higher, the sell-off of equities on US and global markets will continue.
On the domestic front, the economy is showing more and more signs of improvement. Manufacturing data released last week, had indicated that manufacturing production increased by 2% in December. Mining production during 2017 recorded growth of more than 4%.
On the JSE, the all share index ended 2753 points (-4.7%) lower than the previous Friday and closed on 55902.62 points. This was already 5693 points (9.2%) lower than the high of 61596 points on January26.
Last week the JSE Top40 index traded 5% down, while financials lost 1%. Industrial shares retreated 5.7%, while resources decreased 6.5%. Listed property shares on the other hand increased by 2.7%.
Meanwhile, the rand rate moved volatile against the dollar last week.