Download Weekly Note - 23 June 2025
Local Market Update:
Foreign investors have withdrawn $3.7 billion from South African equities since October—the longest sustained outflow in five years and a sharp rise from the combined $1.9 billion pulled in 2023 and 2024—signalling eroding global confidence in the local equity market. This comes despite upbeat April retail sales, which climbed 5.1% y/y, and a steady May inflation print of 2.8%, still below the SARB’s 3%–6% target range. The central bank continues to advocate for a lower inflation target to enhance competitiveness, while warning of increased vulnerability to capital flight and higher funding costs amid global instability. Encouragingly, its first climate risk stress test found local banks resilient, and the World Bank is considering a $500 million loan to support South Africa’s ambitious $25 billion grid upgrade programme to address chronic power constraints.
European Market Update:
Investor confidence in Germany surged in June, with the ZEW index climbing to 47.5 from 25.2, buoyed by optimism around global demand and new fiscal support, including a €46 billion tax relief plan and €500 billion infrastructure fund. However, broader regional signals remain mixed—France’s GDP is forecast to grow just 0.2% per quarter for the rest of 2025, while UK housing slowed sharply in April and May retail sales dropped 2.7%. Despite holding rates steady, the Bank of England faces persistent energy cost pressures that continue to weigh on sentiment. In contrast, central banks in Switzerland and Norway cut rates, with the latter move surprising markets. German producer prices fell 1.2% y/y, reinforcing disinflationary momentum. Meanwhile, at Russia’s economic forum, President Putin downplayed the war’s economic fallout, though local business leaders noted ongoing structural vulnerabilities.
US Market Update:
Soft U.S. retail sales and flat industrial production reinforced signs of a cooling economy, while elevated jobless claims pointed to further labour market softness. Markets also digested the White House’s 90-day extension for ByteDance to divest TikTok’s U.S. operations, temporarily easing regulatory pressure. On the policy front, Fed officials delivered mixed signals—Chair Powell flagged tariff-related inflation risks, Waller leaned toward rate cuts, and Barkin urged caution. Heightened geopolitical risk added to the uncertainty, as President Trump authorised airstrikes on Iranian nuclear facilities over the weekend, amplifying Middle East tensions and weighing on investor sentiment.
Asia Market Update:
Asia’s economic signals remained mixed last week. South Korea unveiled a second fiscal stimulus to boost demand, while China reported slower industrial output but firmer retail sales, highlighting an uneven recovery. China’s property sector remains under pressure, with new home prices falling again in May. Japan saw its exports drop 1.7%—the sharpest decline since September—amid weaker semiconductor and machinery demand, while persistent inflation above 2% has renewed expectations of further Bank of Japan tightening. Meanwhile, Australia’s jobless rate held steady, Indonesia paused rate cuts to support credit growth, and China left lending rates unchanged as policymakers navigate persistent macroeconomic uncertainty.
Currency Market Update:
The South African rand weakened last week as investor sentiment turned risk-averse amid heightened geopolitical tensions stemming from the Israel-Iran conflict. Global market participants sought safety in hard currencies, adding pressure to emerging market assets, including the rand. This morning, the U.S. dollar firmed modestly amid heightened geopolitical uncertainty, with market participants awaiting Iran’s next moves following recent airstrikes, which may further influence currency market dynamics and risk sentiment in the short term.
Commodity Market Update:
Oil prices rallied strongly last week amid escalating conflict between Israel and Iran, stoking fears of wider regional instability and potential U.S. military involvement. In Japan, rice prices surged 101.7% year-on-year in May—an historic spike attributed to inflation and tight supply—which prompted government action. Despite ongoing geopolitical risks, gold prices edged lower as a hawkish U.S. Federal Reserve outlook capped gains, reinforcing cautious sentiment in safe-haven assets.