Financial overview (see Downloads for full report)

Financial markets experienced a mid-month scare when the global credit rating agency, Standard and Poor's, revised their outlook on US government debt from neutral to negative and warned that the US might face a possible credit rating downgrade in the future. The local market was not spared the knee-jerk reaction, but strong global data towards the end of the month helped to revive risk appetite and turned foreigners into firm buyers of both domestic equities and bonds. The FTSE/JSE All Share Index gained 2.2% by month-end after it was trading by more than 2% lower during the month. Telecoms was once again the best performing sub-sector and industrial shares the best performing sector, with a return of 4.3%. Financial shares closed 2.9% higher and resources ended marginally positive with a return of 0.1%.

Higher food and energy prices have driven global inflation rates higher, but the impact on domestic inflation figures has been relatively muted so far. The CPI increase, on a year on year basis, for March was 4.1%, up from 3.6% the previous month but still comfortably below the Reserve Bank's upper limit of 6%. Economic data has been mixed with private sector credit extension below expectations and the leading indicator for manufacturing edging lower. The IMF, in its latest publication, predicts that the South African economy will grow by 3.5% during 2011. The return of foreign investors and less aggressive interest rate hike expectations caused a rally in the bond market. The All Bond Index gained 2.2% during the month. The rand appreciated by 3.1% against the US dollar on the back of continued dollar woes to close at R6.56 a dollar. However, the rand weakened by 1.4% against the euro. The rand's movement against the dollar broadly tracked the movement in the gold price as gold gained 6.7% to end the month above $1,500 an ounce.

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