Markets Monday: Rand weakens as global stocks rally on ‘Goldilocks’ US jobs data

Global equities rose on Monday after US payrolls data showed much weaker-than-expected job creation, easing pressure on the Federal Reserve to hike interest rates and helping lift risk assets even as the South African rand came under renewed pressure.

Rand under renewed pressure

The South African rand has weakened over the past two weeks, falling from below R16 to the US dollar to around R16.70 late last week, its weakest level since July. On Monday morning the currency was trading at R16.71 to the US dollar, R18.67 to the euro and R22.06 to the British pound.

Reuters reported the currency was heading for its fourth consecutive weekly decline, with a stronger US dollar and rising global bond yields cited as encouraging investors to pull back from emerging-market assets. Investec chief economist Annabel Bishop said the Middle East conflict, higher oil prices and safe-haven flows into the dollar were also weighing on the rand, while noting the currency’s smaller moves against the euro and pound suggested the move was partly about dollar strength rather than a sharp deterioration in South Africa’s fundamentals.

Stocks rally after ‘Goldilocks’ jobs print

The US non-farm payrolls report showed the economy created 29,000 jobs in September, well below forecasts of around 90,000, and revisions to the prior two months reduced earlier readings. Markets quickly pared back expectations of a Fed rate hike this month; CME’s FedWatch tool showed just over a 20 percent chance of a hike, down from more than 65 percent early last week.

That repricing helped equity markets worldwide. Asian indices followed Wall Street higher, with Tokyo’s Nikkei 225 jumping and briefly topping 70,000 points, and gains in Taipei, Hong Kong, Sydney, Singapore, Wellington, Bangkok, Mumbai, Manila and Jakarta. London edged up while Frankfurt and Paris edged down. Seoul and Shanghai were closed for holidays.

Market commentators framed the jobs data as settling into a moderate hiring trend.

“The recent hiring trend has settled into that not-too-hot, not-too-cold Goldilocks porridge zone of roughly 40,000 to 60,000 jobs a month,”

wrote Stephen Innes at SPI Asset Management. He added:

“Core PCE (personal consumption expenditure) is still uncomfortable at three percent year over year, but the shorter-term pulse has cooled noticeably.”

Oil eases amid coordinated reserves release

Oil prices fell on Monday, extending a drop from Friday. Both main contracts were down despite Brent crude remaining above $100 a barrel after easing from recent four-month highs. The mood was supported by a G7 decision to release 100 million barrels of diesel and crude oil over four months and to refrain from energy export restrictions.

Supply details in the market were mixed: maritime tracking firm Kpler said crude exports from the Middle East (excluding Iran) surpassed pre-war levels last week, but the supply of refined fuels such as diesel remained tight because of damaged refineries. The report also noted damage to Russian refineries from Ukrainian strikes. The oil price slide was partly offset by news that Yemen had launched a new military operation against the Houthis.

Key market figures (around 10am SA time)

• SA rand: R16.71/$, R18.67/€, R22.06/£
• Tokyo – Nikkei 225: up 2.4% at 69,946.86 (close)
• Hong Kong – Hang Seng: up 0.3% at 24,040.34 (close)
• London – FTSE 100: up 0.1% at 10,473.94
• West Texas Intermediate: down 1.6% at $89.69 per barrel
• Brent North Sea Crude: down 1.0% at $101.22 per barrel
• New York – Dow: up 0.5% at 51,176.96 (close)

The combination of softer oil prices, weaker US payrolls and lower odds of an immediate Fed hike supported equities, while dollar strength and higher global yields continued to pressure emerging-market currencies such as the rand.