Rand slips and JSE flat as oil, inflation and Fed bets weigh

South African markets opened the week cautiously, with the rand under pressure and the Johannesburg Stock Exchange (JSE) broadly flat as investors weighed higher oil prices, domestic inflation risks and shifting expectations for US interest rates.

The FTSE/JSE All Share Index was down 0.05% at about 108,324 points by 10.47am, while the Top 40 was marginally lower at 100,773 points. Resources were the strongest part of the market, with the Resource 20 index up 0.93% and the precious metals and mining index up 1.10%. Financials were weaker, with the Financial 15 down 0.83%.

The rand traded at about R16.68 to the dollar this morning, having weakened by roughly 0.2% in early trade. Investors were awaiting South Africa's September purchasing managers' index and the government's October fuel price adjustment, Reuters reported.

Higher energy costs are adding to the pressure on the currency. Analysts expect petrol to rise by about R3.29 a litre and diesel by roughly R3.19, although the final adjustment depends on the government's announcement. The yield on South Africa's benchmark 2035 government bond had risen to about 8.88% in early trade.

Market data showed Brent crude at about $101.31 a barrel, down 0.92% in morning trade. Gold was 0.47% higher at about $4,161.57 an ounce, platinum gained 1.84% to $1,730.90 and silver rose 2.19% to $61.69.

Global equities began the week on a firmer footing after weaker US employment data reduced expectations of another Federal Reserve rate rise this month. On Friday, the S&P 500 gained 0.73%, the Nasdaq 1.19% and the Dow Jones Industrial Average 0.49%.

The rally followed data showing that US non-farm payrolls rose by only 29,000 in September, well below the 90,000 economists had expected. The probability of a 25-basis-point Fed rate rise at the end of October fell to 22.7%, from 64.2% a week earlier, Reuters reported.

The softer jobs picture has strengthened expectations that the Fed may leave rates unchanged later this month, although bond markets remain unsettled, with global government bond yields still elevated despite the change in rate expectations.

In Asia, Japan's Nikkei 225 surged 2.4% to 69,946.86, briefly moving above 70,000 for the first time in three months. Hong Kong's Hang Seng gained 0.3% to 24,040.34, while Australia's ASX 200 was little changed. Mainland Chinese markets remained closed for the National Day holiday.

European markets were more mixed. The pan-European STOXX 600 was about 0.3% higher and the FTSE 100 up about 0.5%. Germany's DAX was broadly flat, but France's CAC 40 fell about 0.9% on renewed concern over French public finances and political uncertainty.

The euro fell to a 17-month low of about $1.1160 against the dollar as investors focused on France's deteriorating fiscal position. French 10-year government bond yields rose to about 4.92%, with the spread over German Bunds widening beyond 150 basis points.

US equity futures were little changed ahead of Monday's session, with S&P 500 and Dow futures down about 0.1% and Nasdaq futures broadly flat. Investors are looking ahead to US economic data and the release of the Fed's latest meeting minutes later in the week.

Oil prices eased as markets responded to increased Middle East supply and a reduction in some immediate concerns over disruptions. Brent was around $101 a barrel, while US West Texas Intermediate traded below $90.

Gold recovered slightly after its biggest weekly decline since June. Spot gold was around $4,162 an ounce, supported by the weaker US jobs data and reduced expectations of an October Fed rate rise.

For South African investors, the combination of a softer rand, elevated oil prices and strong precious metal prices remains an important driver of the local market, particularly the resources-heavy JSE.