Daily Market Report – 7 Apr 2025

Global Stocks Sink, Central Banks Cornered

Recession Fears Trigger Global Capitulation – The Market Is Demanding Action

Trade War Turns Tectonic, Economic Winter Is Here

• Asian equities crash: Hang Seng (-10%), Nikkei (-6.4%), Shanghai (-6%) in what’s being dubbed a “mini-crash.”
• ZAR hit but holding: Down ~1% this morning, but USD weakness, surging gold, and anticipated central bank support are keeping it afloat.
• Recession priced in: Short-dated UST yields crater—2-year plunges 20bp to 3.43%—as Fed cut expectations surge to 116bp by year-end.
• JSE: Already down R1 trillion this week, pricing in the fallout from Trump’s tariff shock and DA-ANC GNU fracture.

FX Focus – ZAR Holding… Barely

• Spot: 19.25
• Range: 19.00 – 19.3800
• Trend: Bearish, but momentum is slowing as the USD softens and gold shines.

Drivers:

• Domestic: GNU uncertainty and trade sector in limbo (esp. autos).
• Global: Flight from risk, but USD is NOT the safe haven this time—CHF and JPY are.
• Gold price at record levels: Boosting SA’s terms of trade and helping contain ZAR depreciation.

The ZAR’s pain is less than expected given the global chaos. If markets believe the SARB won’t overreact, and SA bonds stay attractive, the ZAR could stabilise above 19.00—but risks remain heavily skewed to the downside if sentiment sours further.

Fixed Income – Bond Market Screams Recession

• SA 10Y yield: Tracking the US drop, but not as aggressively due to fiscal and political instability.
• US 2Y yield: -20bp to 3.43% – lowest since Sept 2022.
• Global curve steepening: Classic recession signal as short-end drops faster.

Insight:

• Risk-on assets are toxic. Bonds are king.
• If central banks resume QE or pause QT, bonds will rally harder.
• SA’s spread (700+bp) over US bonds remains a massive carry trade incentive, but risk sentiment must improve for inflows to resume.

FRA Curve – Rate Cuts Back on the Menu

• Markets now anticipate multiple SARB cuts, in sync with the Fed and ECB’s coming shift.
• Pressure on central banks will intensify this week. Expect forward guidance to turn dovish fast.

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