Monthly Market Update – 07/2020

Monthly Market Update

July overview

During July, South Africa entered the top 10 of Covid-19 hotspots worldwide as reported cases climbed steadily. Government’s controversial decision to ban cigarettes and alcohol has had a significant impact on tax collection. The nation also faced load shedding.

The Reserve Bank lowered interest rates once more in an ongoing effort to cushion the blows of the pandemic on the economy. The cut of 25 basis points brought the repo rate to an all-time-low of 3.5%. At month-end, the International Monetary Fund agreed to loan R70 billion to South Africa to assist in managing the immediate financial consequences of Covid-19.

Global equity markets had another relatively strong month in July, with less volatility than has been the case in prior months. As global GDP numbers for the second quarter of 2020 were released, the devastating impact of the coronavirus lockdown on the global economy came to light.

The US reported an annualised contraction of 32.9%, the worst since the second world war. Real GDP in the European Union declined at an even faster pace, an annualised rate of 39.8%. Commodities had a terrific month with US dollar weakness a strong tailwind.

Following a period of strong appreciation, the US Dollar retreated sharply in July. The 50-day moving average of the US Dollar Index dropped below the 200-day moving average during the month as the USD fell to its lowest level in over 2 years.

Geopolitical tensions between the US and China flared up again as the two superpowers clashed over trade and technology. Economic data continued to be encouraging and the US reported 1.8 million added jobs in July.

Although the profound impact of the coronavirus crisis on the global economy is slowly becoming more quantifiable, as long as the virus is still looming, uncertainty around future disruptions and the shape of the recovery will remain.

The above information is only for informative purposes and cannot be seen as advice as defined in the Financial Advisory and Intermediary Services Act, 37 of 2002. Although the necessary measures were taken in the preparation of this document, RiG Advisory Services (Pty) Ltd cannot be held responsible for any actions taken as a result of this document. Consult us for personal advice that will be appropriate for your unique circumstances. RiG Advisory Services (Pty) Ltd is an authorised financial services provider (FSP number: 44730).

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