Rand range-bound, US stimulus in focus, stocks slide

The rand traded flat on Tuesday, lacking any drivers of momentum in either direction as investors tread cautiously with an eye on local events and upcoming elections in the United States.

At 1500 GMT, the rand traded at R16.53 per dollar, not far off its overnight close of R16.52, reflecting subdued activity in other emerging markets that has seen the local unit eke out modest gains over the past few sessions.

Traders are, however, split on how long the calm will hold, with rising Covid-19 infections in Europe, President Cyril Ramaphosa’s unveiling of an economic recovery plan on Thursday, and US elections in November.

“The rand remains range-bound and yet still destined for a bigger move lower I believe, but at the moment it is not worth venturing into from a speculative situation,” said Standard Bank’s chief trader Warrick Butler in a note.

But Lukman Otunuga, a senior analyst at FXTM, sees the rand “poised to turn volatile and highly sensitive against the dollar,” as Ramaphosa’s plan looms.

Bonds inched firmer, with the yield on the benchmark government issue due in 2030 down 2 basis points to 9.415%.

In the equities market, stocks fell alongside emerging market peers on a worsening emerging market growth outlook from the International Monetary Fund and news that Johnson & Johnson paused its novel coronavirus vaccine trials after one of the participants contracted an unexplained illness.

The Johannesburg All-Share index fell 0.9% to 55,054 points, while the Top 40 index ended the session 0.85% weaker at 50,722 points.

The travel and leisure and healthcare sectors suffered, losing 3% and 3.84% respectively.

Commodity stocks also weakened, down 1.3%, after total mining output continued to fall, 3.3% year-on-year in August but at a slower pace compared to a revised contraction of 6.5% in July.

“Our forecast is for mining to remain weak for the remainder of the year, but to be at vastly better levels than at the height of the lockdown,” economists at Nedbank said in a note.