Daily Market Report 2 Oct
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Middle East Conflict: Tensions in the Middle East have escalated after Iran launched 200 missiles at Tel Aviv, increasing risk aversion globally and driving demand for the USD as a safe-haven asset.
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South African Economy: Vehicle sales in South Africa, though still contracting, show signs of stabilizing, with a smaller decline in September. Meanwhile, the Absa PMI rose above 50, indicating some recovery in the manufacturing sector, boosted by a period of no load-shedding and the beginning of interest rate cuts by the South African Reserve Bank (SARB).
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Global Markets: The USD strengthened due to geopolitical risks and better-than-expected US labor market data. Additionally, global bond yields, particularly in the Eurozone, are reacting to falling inflation, raising the likelihood of rate cuts.
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ZAR Performance: The ZAR has retreated from its recent highs due to risk aversion following the Middle East conflict, along with stronger USD performance driven by resilient US labor data. However, the long-term outlook for the ZAR remains positive with expected rate cuts
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- Exchange Rate Risk arises when an organisation conducts business in multiple currencies, either through exports and imports, or through foreign operations.
- Commodity Price Risk is the financial risk posed to an entity’s financial performance and profitability by fluctuations in commodity prices that are primarily driven by external market forces and are therefore beyond the entity’s control.
- Interest Rate Risk management for companies involves identifying, measuring, and managing the potential impact of changes in interest rates on a company’s financial position and profitability.