The JSE closed flat on Friday as the market sought direction from the surprising Reserve Bank decision to keep interest rates on hold on Thursday.

Gold and banking shares gained on the day while platinums retreated.

Analysts expected the Bank to cut rates by a further 25 basis points following July’s surprise cut, but the Bank cited challenging conditions ahead which mitigated against a rate cut at this stage. These included the possibility of higher rates later in the year in the US and UK, which could divert flows from emerging markets, thus weakening the rand, a key driver of inflation.

Political risks include the ANC’s elective conference in December, where it will choose a new leader to replace President Jacob Zuma. Tension is already running high as a number of candidates have put themselves forward for consideration.

The financial markets were caught off guard by the Bank’s decision, causing a significant round of rand buying as investors had priced in a rate cut, said FXTM analyst Jameel Ahmad, adding that, "Geopolitical tension caused the rand to lose some of its gains on Friday."

However, the JSE showed little reaction to the firmer rand, amid uncertainty if it would last ahead of possible further downgrades and the ANC conference. Some analysts also questioned the likelihood of the Bank reducing rates at its November meeting as the situation may be even more unfavourable for a cut by then.

"This was the perfect opportunity for the Bank to cut the repo rate," said Old Mutual economist Tinyiko Ngwenya. "It will be tricky for them to continue cutting in November as that will be too close to the ANC conference and rand volatility is a key risk," she said.

Global markets were mixed with the Dow opening flat, while the FTSE 100 perked up 0.74% after UK Prime Minister Theresa May confirmed, in her long awaited Florence speech, that the UK will leave the EU in March 2019 and forge a new EU relationship from that date as part of a two-year implementation period.

Markets kept a watchful eye on North Korea, which has threatened to conduct another nuclear test, which inflamed geopolitical tension. North Korea’s foreign minister said on Friday the country could detonate a hydrogen bomb over the Pacific in response to US President Donald Trump’s speech before the UN earlier in the week.

Trump said the US would "totally destroy" North Korea if forced to defend itself or its allies, at which Pyongyang called Trump "deranged".

The all share closed 0.05% lower at 55,839.70 points and the blue-chip top 40 gained 0.03%. Platinums lost 0.43%, food and drug retailers 0.34%, resources 0.32%, and industrials 0.07%. The gold index added 1.28%, banks 0.65%, financials 0.23%, and general retailers 0.16%.

Despite closing lower in the past four days, the all share ended the week 0.35% higher, on Monday’s upbeat performance. The all share has gained 10.24% this year.

Anglo American ended the day 0.79% lower at R237.11.

British American Tobacco rose 0.56% to R823.42.

Sasol dropped 0.93% to R374.50.

Among gold stocks, Harmony rose 2.43% to R24.42.

Lonmin gained 4.06% to R12.82.

Standard Bank added 1.41% to at R162.65, Barclays Africa 0.79% to R139.59, and Nedbank 0.54% to R204.47.

Discovery closed 1.39% off at R142.22.

Steinhoff Africa Retail (Star) was 0.46% lower at R21.75, after debuting on the bourse earlier in the week. Steinhoff dropped 0.17% to R60.50, but Shoprite lifted 0.88% to R206.

Brait ended the day 2.68% lower at R53.40 and has lost 39% so far this year, after having relinquished 47.5% in 2016.

Property group Growthpoint gained 0.20% to R15.15, but Attacq lost 1.05% to R18.83.

Naspers shed 0.78% to R2,962.

Spur lost 3.23% to R30.

Sappi added 2.11% to R88.01.

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