Markets were unsettled by tensions in the Middle East last week; however, optimism about the possible reopening of the Strait of Hormuz supported sentiment. Locally, early July activity data presented mixed signals, while the manufacturing PMI remained weak.
International Market Developments
Optimism increased last week over a possible agreement to reopen the Strait of Hormuz. Nevertheless, markets continued to await a joint statement from Iran and Oman following reports of a maritime passage agreement.
US labour data showed renewed weakness, as non-farm payrolls unexpectedly declined by 23,000 in July following a downwardly revised gain of 20,000 in June, compared with forecasts for an increase of 80,000. Job losses were concentrated in local government education and retail trade, while health care added positions. The unemployment rate edged down to 4.1% as the labour force contracted, and the participation rate fell to its lowest level since early 2021. Federal Reserve officials maintained a cautious stance, noting that inflation risks had eased but remained elevated.
In the Eurozone, the Manufacturing PMI rose from 51.4 in June to 51.9 in July, close to the flash estimate of 52.0 and marking the strongest improvement in factory activity since April. Producer prices declined from 0.2% in May to -0.3% in June, the first decrease in four months and in line with forecasts, largely due to lower energy costs. On an annual basis, producer-price inflation moderated from 5.9% to 4.6%, remaining above its long-term average but well below the 2022 peak. At the same time, retail sales fell from a revised increase of 0.4% in May to a decline of 0.3% in June, against expectations of a 0.1% gain. Decreases in food and non-food sales were partly offset by a rebound in automotive fuel sales. Year on year, retail-sales growth slowed from 1.9% to 0.7%, its weakest pace since July 2024 and below the 1.0% forecast.
Looking ahead, in addition to developments involving Iran, the key event for global markets will be Wednesday’s release of the US Consumer Price Index for July.
Local Market Developments
In South Africa, the Absa PMI declined from 47.3 in June to 46.8 in July, marking a second consecutive month of contraction. Demand and production showed some recovery, but inventories declined, input costs remained elevated and firms expected conditions to weaken as renewed tensions in the Middle East placed upward pressure on oil prices. The S&P Global PMI eased from 50.5 in June to 50.3 in July, indicating only a marginal improvement in private-sector conditions. Activity returned to growth, exports gained momentum and cost pressures eased. However, new orders declined again, hiring slowed and business confidence weakened. Gross foreign-exchange reserves fell to USD 73.45 billion in July from USD 74.11 billion in June, their lowest level since November 2025.
Looking ahead, manufacturing output and labour-market data are expected to be the principal drivers of domestic market momentum.