June 1, 2020 / 3:52 PM / a month ago

UPDATE 1-South Africa's rand advances on easing coronavirus fears

(Adds latest prices, analyst comments)

JOHANNESBURG, June 1 (Reuters) - South Africa’s rand firmed more than one percent on Monday, lifted by hopes of economic recoveries at home and abroad as more countries eased coronavirus lockdowns.

Stocks rose as factories, restaurants, mines and shopping malls reopened and millions returned to work.

At 1500 GMT, the rand was 1.03% firmer at 17.3500 per dollar, after closing at 17.5300 on Friday in New York, adding to gains of more than 8% in May in an advance spurred mainly by offshore factors and dampening COVID-19 worries.

“Rising global market confidence that the recovery in the global economy is indeed in sight, and growing optimism that the worst may be over, has driven yield-seeking investors into riskier assets,” said Investec’s Annabel Bishop.

Manufacturing PMI recovered slightly in May from April’s record low, although factory activity still contracted heavily, while the world’s no.2 economy, China, also recorded improved factory activity.

Some relief also came from easing trade tensions between China and the United States. On Monday, Washington stopped short of imposing new tariffs or sanctions on Beijing and left the so-called Phase 1 trade deal intact.

Local economic data was mixed. Factory activity inched up in May but remained in overall contraction. New car sales tumbled again, down 68%.

Africa’s most industrialised economy was already in recession when the pandemic struck. The central bank expects the economy to shrink 7% this year, but economists expect an even deeper recession as well as deep job losses.

The benchmark FTSE/JSE all share index rose 0.88% to close at 50930 points while the top 40 companies’ index closed up 0.87% to 46,950.

Bonds also firmed, with the yield on the 2030 bond down 13.5 basis points to 8.76%.

Reporting by Olivia Kumwenda-Mtambo and Promit Mukherjee; Editing by Edmund Blair and Nick Macfie

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