MARKET WRAP: JSE closes weaker as renewed risk-off trade hits market
The JSE all share closed weaker on Tuesday as renewed risk-off trade returned to the market amid a weaker US bond market, causing the dollar to firm.
The local market was also on tenterhooks before the budget on Wednesday, which analysts have cautioned could temper the momentum created by Cyril Ramaphosa’s rise to the Presidency. Indications of a deteriorating fiscal position in the budget presentation, might give the green light to ratings agency Moody’s to announce further downgrades of the South African economy next month.
The Dow was 0.45% weaker at the JSE’s close. The FTSE 100 was lower, but European markets picked up the pace on the softer euro.
Losses on the JSE were broad-based, led by retailers and miners. Rand hedges were mixed on the weaker rand, with Naspers down 3% at one stage before recovering towards the close. British American Tobacco ended the day higher. Property stocks remained under pressure, despite upbeat annual results from Nepi Rockcastle, released on the day.
The all share closed 1.32% lower and the top 40 dropped 1.35%. The gold index dropped 3.44%, general retailers 2.02%, resources 2.01%, food and drug retailers 1.78%, industrials 1.42%, and banks 1.26%.
Nedbank slipped 2.56% to R285.50 and Barclays Africa 2.27% to R198. Discovery rose 3.13% to R182.07, after reporting earlier that its after-tax profit grew 30% to R2.7bn in the six months to end-December, compared to the prior period.
The rand was at R11.730 to the dollar at the close from R11.6722. The rand’s moves were in sync with other emerging-market currencies, including the Turkish lira and Indian rupee. The euro was at $1.2350 from $1.2407, reflecting the strength of the dollar after earlier weakening to $1.25.
The dollar steadied as investors become cautious ahead of the release of the US Federal Reserve minutes for the January meeting, analysts said. Comments from US officials that a weaker greenback should help reduce the country’s budget deficit also supported the dollar.
The relative strength in the dollar came as US government bond yields climbed again, with the yield on the benchmark treasury paper touching its highest level in four years, at 2.90%.
Local bonds were marginally weaker, with the R186 bid at 8.105% from 8.080%. The US 10-year treasury was at 2.8941% from 2.8777%.
The top-40 Alsi futures index lost 1.25% to 51‚075 points. The number of contracts traded was 24,276 from Monday’s 12‚909.