Here’s what’s happening in the markets today:
- With his budget speech set for tomorrow (Wednesday), finance minister Pravin Gordhan is expected to implement austerity measures to drag the South African economy out of its troubled state. Markets are holding their breath to see how the minister will play it – while economists and analysts are practically begging the minister to rein Zuma in, and rebuild confidence in the economy.
- While avoiding a credit rating downgrade to junk has been at the top of Zuma’s rhetoric surrounding the budget and the economy, economists say that even if the country got downgraded, it wouldn’t signal a mass exodus of investors. This is partly due to the fact that much investment happens on domestic, rather than international credit ratings.
- South Africa’s rand firmed to an eight-week high against the dollar on Monday as investors returned to high yielding assets boosted by improved oil and commodity prices. On Tuesday the rand was trading at R15.24 to the dollar, R21.51 to the pound and R16.81 to the euro.
- In global news, Asian shares retreated from a seven-week high on Tuesday as reversed, while the euro and sterling were hit by uncertainty over Britain’s membership in the European Union. Wall Street jumped on the brief surge in oil prices on Monday, before the oil markets retreated.
- Oil futures fell more than 1% on Tuesday amid worries rising Iranian output would deepen a global crude oversupply, offsetting expectations of a drop in U.S. production that had spurred sharp price gains in the prior session. US crude was down 50 US cents to $32.89, while Brent crude was down 50 US cents to $34.19.
In other news: A research paper put out by the Organisation Undoing Tax Abuse (Outa) shows that South Africa overpaid for the Gauteng Freeway Improvement Project by an average of 321%. The group compared the upgrade costs with 11 other international case studies to reach the conclusion.