South African rand flat as uncertainty over Middle East conflict hangs over markets
JOHANNESBURG, June 20 (Reuters) - The South African rand was trading almost flat early on Friday, as investors worried about conflict in the Middle East, with Israel and Iran's air war entering a second week and a decision on potential U.S. involvement.
At 0649 GMT the rand traded at 18.0250 against the dollar , little changed from Thursday's close.
The U.S. dollar also traded flat against a basket of currencies with investors in limbo after the White House said on Thursday that Trump will decide in the next two weeks whether the U.S. will get involved in the Israel-Iran war.
No major domestic data releases are due on Friday but domestically, investors will look to producer inflation (ZAPPIY=ECI), opens new tab and leading indicator (ZALEAD=ECI), opens new tab data set to be released next week, to gauge the health of Africa's most industrialised economy.
South Africa's benchmark 2035 government bond was marginally stronger in early deals, as the yield fell 2 basis points to 10.12%.
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The Independent
25 minutes ago
- The Independent
Erdogan vows to boost Turkey's missile production as Israel-Iran war escalates
As the war between Israel and Iran escalates, Turkish President Recep Tayyip Erdogan has said he plans to strengthen the country's deterrence capabilities so that no country would dare attack it. Erdogan announced plans this week to step up Turkey's production of medium- and long-range missiles. Erdogan discussed the Iran-Israel war with German Chancellor Friedrich Merz in a telephone call on Friday. He told Merz that the Iranian nuclear issue can only be resolved through negotiations, according to Erdogan's office. Despite Turkey's tense relations with Israel, analysts and officials don't see an immediate threat of the conflict spreading into NATO-member Turkey. Still, some see the move by Erdogan as a sign that the Israel-Iran war could trigger a new arms race in the region, with countries not directly involved in the fray ramping up their military efforts to preempt future conflicts. Ahmet Kasim Han, a professor of international relations at Istanbul's Beykoz University, said that Turkey was reacting to what he described as an unraveling world order. 'The Turkish government is drifting toward what is the name of the game in the Middle East right now: an escalation of an arms race,' he said. Israel and the U.S. have set a high standard in aerial warfare, creating a technological gap that Turkey and others are eager to close, Han said. Erdogan said following a Cabinet meeting on Monday that 'we are making production plans to bring our medium- and long-range missile stockpiles to a level that ensures deterrence, in light of recent developments." 'God willing, in the not-too-distant future, we will reach a defense capacity that is so strong that no one will even dare to act tough toward us," Erdogan said. In an separate address days later, the Turkish leader highlighted Turkey's progress in its domestically developed defense industry, that includes drones, fighter jets, armored vehicles and navy vessels, but stressed that continued effort was needed to ensure full deterrence. 'Although Turkey has a very large army — the second largest in NATO — its air power, its air defense is relatively weaker,' said Ozgur Unluhisarcikli, a Turkey analyst at the German Marshall Fund think tank. The ongoing conflict has reinforced the importance of air superiority, including missiles and missile defense systems, prompting 'countries in the region, including Turkey to strengthen its air power,' he said. Since the start of the conflict, Erdogan has been scrambling to end the hostilities. He has held a flurry of phone calls with leaders, including U.S. President Donald Trump and Iranian President Masoud Pezeshkian, offering to act as a 'facilitator' for the resumption of negotiations on Iran's nuclear program. There are deep concerns in Turkey that a prolonged conflict will cause energy disruptions and lead to refugee movement from Iran, with which it shares a 560 kilometer-long (348 mile) border. Turkey relies heavily on energy imports, including from Iran, and rising oil prices due to the conflict could aggravate inflation and further strain its troubled economy. Turkey has strongly criticized Israel's actions, saying Iran has the legitimate right to defend itself against Israel's attacks, which came as nuclear negotiations were ongoing. Once close allies, Turkey and Israel have grown deeply estranged, especially after the start of the war in Gaza in 2023, with Erdogan becoming one of Israeli Prime Minister Benjamin Netanyahu's fiercest critics. Relations further deteriorated following the fall of Syrian President Bashar Assad's government, as Israel grew increasingly wary of expanding Turkish influence in Syria. Earlier this year, Turkey and Israel however, established a 'de-escalation mechanism' aimed at preventing conflict between their troops in Syria. The move came after Syria's Foreign Ministry said that Israeli jets had struck a Syrian air base that Turkey reportedly hoped to use. Israel hasn't commented on Turkey's announcement that it plans to ramp up missile production, but Israeli Foreign Minister Gideon Saar responded to Erdogan's criticisms of Israel over its attack on Iran in an X post on Wednesday. He accused Erdogan of having 'imperialist ambitions' and of having 'set a record in suppressing the freedoms and rights of his citizens, as well as his country's opposition.' Erdogan's nationalist ally, Devlet Bahceli, suggested that Turkey was a potential target for Israel, accusing the country of strategically 'encircling' Turkey with its military actions. He didn't elaborate. Analysts say, however, that such statements were for 'domestic consumption' to garner support amid growing anti-Israel sentiment in Turkey. 'I don't think that Israel has any interest in attacking Turkey, or Turkey has any interest in a conflict with Israel,' Han said.
Reuters
an hour ago
- Reuters
US equity funds see hefty outflows on Israel-Iran conflict
June 20 (Reuters) - U.S. equity funds logged the largest weekly outflow in three months in the week through June 18 as intensifying Israel-Iran tensions and persistent concerns over the economic impact of elevated U.S. tariffs drove investors to reduce risk exposure. According to LSEG Lipper data, investors exited U.S. equity funds of $18.43 billion during the week, posting the largest weekly net figure since March 19. As a week-old air war between Israel and Iran intensified, the White House on Thursday said President Donald Trump will decide in the next two weeks whether the U.S. will get involved in the war. Investors ditched a robust $19.38 billion worth of large-cap equity funds - the largest weekly net figure since March 19. The small-cap and mid-cap segments also witnessed approximately $2.4 billion and $1.5 billion worth of net withdrawals. U.S. sectoral funds, however, were popular for a fourth straight week, drawing in roughly $855 million in net inflows. The tech and industrial sectors secured a noteworthy $1.85 billion and $445 million, respectively, in net purchases, while the financial sector lost a significant $1.22 billion in net selling. U.S. bond fund inflows, meanwhile, dropped to a seven-week low of $2.79 billion during the week. The short-to-intermediate investment-grade funds, and short-to-intermediate government and treasury funds segments received just $642 million and $616 million, respectively, compared with approximately $2.37 billion and $1.02 billion worth of weekly net purchases in the prior week. Demand for mortgage funds was, however, at a five-week high as these funds attracted weekly net inflows of $566 million. Money market funds were meanwhile out of luck for a second successive week with weekly disposals worth a net of $7.75 billion.
The Independent
an hour ago
- The Independent
The success of a key NATO summit is in doubt after Spain rejects a big hike in defense spending
The success of a key NATO summit hung in the balance on Friday, after Spain announced that it cannot raise the billions of dollars needed to meet a new defense investment pledge demanded by U.S. President Donald Trump. Trump and his NATO counterparts are meeting for two days in the Netherlands from next Tuesday. He insists that U.S. allies should commit to spending at least 5% of gross domestic product, but that requires investment at an unprecedented scale. Trump has cast doubt over whether the U.S. would defend allies that spend too little. Setting the spending goal would be a historic decision. It would see all 32 countries invest the same amount in defense for the first time. Only last week, NATO Secretary-General Mark Rutte expressed confidence that they would endorse it. But in a letter to Rutte on Thursday, Prime Minister Pedro Sánchez wrote that 'committing to a 5% target would not only be unreasonable, but also counterproductive.' 'It would move Spain away from optimal spending and it would hinder the (European Union's) ongoing efforts to strengthen its security and defense ecosystem,' Sánchez wrote in the letter, seen by The Associated Press. Spain is not entirely alone Belgium, Canada, France and Italy would also struggle to hike security spending by billions of dollars, but Spain is the only country to officially announce its intentions, making it hard to row back from such a public decision. Beyond his economic challenges, Sánchez has other problems. He relies on small parties to govern, and corruption scandals have ensnared his inner circle and family members. He's under growing pressure to call an early election. In response to the letter, Rutte's office said only that 'discussions among allies on a new defense investment plan are ongoing.' NATO's top civilian official had been due to table a new proposal on Friday to try to break the deadlock. The U.S. and French envoys had also been due to update reporters about the latest developments ahead of the summit but postponed their briefings. Rutte and many European allies are desperate to resolve the problem by Tuesday so that Trump does not derail the summit, as he did during his first term at NATO headquarters in 2018. Budget boosting After Russia's full-scale invasion of Ukraine in 2022, NATO allies agreed that 2% of GDP should be the minimum they spend on their military budgets. But NATO's new plans for defending its own territory against outside attack require investment of at least 3%. Spain agreed to those plans in 2023. The 5% goal is made up of two parts. The allies would agree to hike pure defense spending to 3.5% of GDP. A further 1.5% would go to upgrade roads, bridges, ports and airfields so that armies can better deploy, and to prepare societies for future attacks. Mathematically, 3.5 plus 1.5 equals Trump's 5%. But a lot is hiding behind the figures and details of what kinds of things can be included remain cloudy. Countries closest to Russia, Belarus and Ukraine have all agreed to the target, as well as nearby Germany, Norway, Sweden and the Netherlands, which is hosting the June 24-25 summit. The Netherlands estimates that NATO's defense plans would force it to dedicate at least 3.5% to core defense spending. That means finding an additional 16 billion to 19 billion euros ($18 billion to $22 billion). Supplying arms and ammunition to Ukraine, which Spain does, will also be included as core defense spending. NATO estimates that the U.S. spent around 3.2% of GDP on defense last year. Dual use, making warfighting possible The additional 1.5% spending basket is murkier. Rutte and many members argue that infrastructure used to deploy armies to the front must be included, as well as building up defense industries and preparing citizens for possible attacks. 'If a tank is not able to cross a bridge. If our societies are not prepared in case war breaks out for a whole of society approach. If we are not able to really develop the defense industrial base, then the 3.5% is great but you cannot really defend yourselves,' Rutte said this month. Spain wanted climate change spending included, but that proposal was rejected. Cyber-security and counter-hybrid warfare investment should also make the cut. Yet with all the conjecture about what might be included, it's difficult to see how Rutte arrived at this 1.5% figure. The when, the how, and a cunning plan It's not enough to agree to spend more money. Many allies haven't yet hit the 2% target, although most will this year, and they had a decade to get there. So an incentive is required. The date of 2032 has been floated as a deadline. That's far shorter than previous NATO targets, but military planners estimate that Russian forces could be capable of launching an attack on an ally within 5-10 years. The U.S. insists that it cannot be an open-ended pledge, and that a decade is too long. Still, Italy says it wants 10 years to hit the 5% target. Another issue is how fast spending should be ramped up. 'I have a cunning plan for that,' Rutte said. He wants the allies to submit annual plans that lay out how much they intend to increase spending by. The reasons for the spending hike For Europe, Russia's war on Ukraine poses an existential threat. A major rise in sabotage, cyberattacks and GPS jamming incidents is blamed on Moscow. European leaders are girding their citizens for the possibility of more. The United States also insists that China poses a threat. But for European people to back a hike in national defense spending, their governments require acknowledgement that the Kremlin remains NATO's biggest security challenge. The billions required for security will be raised by taxes, going into debt, or shuffling money from other budgets. But it won't be easy for many, as Spain has shown. On top of that, Trump has made things economically tougher by launching a global tariff war — ostensibly for U.S. national security reasons — something America's allies find hard to fathom.
