JOHANNESBURG (Reuters) -The South African rand and stocks strengthened on Tuesday, as investors hoped that a war in Ukraine could be averted despite Russia’s deployment of troops to two breakaway regions in eastern Ukraine.
The threat of a conflict on Europe’s eastern flank had flared on Monday, shaking global markets. [GLOB/MKTS]
But investors were soothed by Russia saying it would only recognise the regions’ independence within the boundaries that Moscow-backed separatists currently control, and as Ukrainian President Volodymyr Zelenskiy played down the prospect of a large-scale conflict.
At 1607 GMT, the risk-sensitive rand traded at 15.0375 against the dollar, 0.97% stronger than its previous close.
Stocks rebounded from losses seen in morning and early afternoon trade to end in the black, with the Johannesburg All-Share index up 0.17% while the Top-40 index rose 0.26%.
“The old adage goes that the market hates uncertainty and while that has clearly been evident at times over the last couple of weeks, there’s no doubt that investors continue to be tempted back in at the slightest hint of diplomacy winning the day,” Craig Erlam, a Senior Market Analyst at OANDA, said.
“Even after the events of the last 24 hours and all of the rhetoric that’s accompanied it, there remains hope.”
Sentiment was also lifted by positive earnings from South African companies as the results season entered another week.
On Wednesday, attention will shift to the 2022 budget that Finance Minister Enoch Godongwana will table in parliament from around 1200 GMT.
Analysts expect Godongwana to present an improved short-term picture thanks to bumper tax receipts from the mining sector, but they remain concerned about the country’s long-term fiscal trajectory.
The yield on the benchmark 2030 government bond added 4.5 basis points to 9.165%, reflecting a weaker price.
(Reporting by Alexander Winning and Nqobile Dludla; Editing by Nick Macfie)
