This publication provides a monthly review of major indexes, important macroeconomic indicators and an overview of the highs and lows of the stock market for the period.
Summary
Global:
- US inflation was unchanged at 3.4% y/y, in line with forecasts, as lower housing and food costs offset a sharp rise in fuel prices.
- The US Federal Reserve raised rates by 25bps – its first hike since 2023 – and left the door open to a further hike before year-end to bring inflation back to target.
- Other central banks also acted on inflation: the European Central Bank and Bank of Japan raised rates – Japan to its highest level in decades, while the Bank of England held steady.
- The US 10-year bond yield climbed above 5% for the first time since 2023, on inflation concerns and rising government debt, stoking fears of slower growth and weighing on markets.
- Middle East tensions stayed elevated, pushing oil above $100/bbl intra-month before cooling to $98/bbl as key pipelines were restored in Saudi Arabia – still an 8.3% gain over the month.
- The Trump-Xi summit in Washington touched on AI cooperation, though the more concrete outcome was an extended trade truce and lower tariffs between the two countries.
- Gold fell 8.5% to around $4,200/oz as investors rotated into the US dollar on the prospect of higher US interest rates, with the dollar strengthening 2% over the month.
- Equity markets were weaker for the month: developed market equities (MSCI World) declined 1.2% and the S&P 500 slipped 0.5%, while emerging markets (MSCI EM) fell 0.8% (all in US dollars), as rising US yields and a stronger dollar weighed on EM economies.
- Over the past year, emerging markets have outpaced developed markets, returning 26.7% versus 15.7% (both in US dollars), led by AI-driven semiconductor demand in key Asian economies.
Local (South Africa):
- The local economy contracted by 0.2% in the second quarter – the weakest growth since 2024 – as weaker mining, manufacturing and trade activity weighed on output. The Reserve Bank still expects a rebound in the second half, with full-year 2026 growth projected at around 1.1%, although the outlook remains fragile given ongoing global shocks.
- SA inflation ticked up slightly, from 4.3% to 4.4%, as higher services costs (insurance, hotels) outweighed relief from lower fuel and food prices.
- In response, the SARB unanimously raised the repo rate by 25bps to 7.25%, and lifted its inflation forecasts to 4.4% for this year and 4.0% for 2027, reflecting geopolitical concerns and the need to keep rates higher for longer to contain inflation.
- For the month, SA equities (FTSE/JSE ALSI) fell 5.8%, and significantly underperformed the broader emerging market index, dragged down by resources (-9.8%). Bonds (FTSE/JSE ALBI) were flat, while listed property gained 0.5%.
- Over the past year, SA equities have returned 4.6%, trailing global shares’ 10.0% in rand terms – a marked cooling from the double-digit gains seen earlier this year as the resources-led rally lost steam alongside a slowing gold price. SA bonds, by contrast, have shown resilience as a diversifier over the same period, returning 12.8% versus SA equities’ 4.6%.
- The rand weakened against the US dollar, moving from R16.12 to R16.42, as the stronger dollar weighed on EM sentiment.