The global financial markets reacted positively to signs of slowing economic activity in the US and other developed market regions, as indicated by the lower-than-expected job creation, an increase in the unemployment rate, and the contraction in the composite Purchasing Manager Index. Investors normally anticipate that slower economic growth may reduce the demand for goods and services, and hence ease the upward pressure on inflation and further interest rate increases. For now, it seems the market consensus is that the interest hiking cycle is over, and the global economy will experience a mild slowdown, and hence avoid a deep recession. Global Equities delivered 4.8% (USD terms), with a much broader participation across the market than what we have witnessed during the previous eleven months. Global Bonds also reported strong gains for December, up by 4.0% (in USD terms).
In the geopolitical risk escalated with the conflicts in the Middle East causing interruptions to maritime trade in the Red Sea. Gold rose by 1.3% (USD terms), though Brent Crude oil prices fell by 7.0% and European wholesale natural gas prices decreased by 23% (EUR terms).
In Rand terms, South African equity outperformed the global equity markets during December, as the local financial sector returned 5.5% (in SA Rands). Companies like FirstRand (+9.0%), Remgro (+11.9%) and Old Mutual (+13.6%) were strong performers for the month. We also witnessed an improvement in the prices of local property companies. The local exchange rate to the US Dollar appreciated during the December, from 18.86 per Dollar to 18.31 per Dollar. Read more.