MARKET WRAP: JSE dips on negative sentiment towards emerging markets
The JSE closed lower on Thursday as the stronger dollar continued to hammer sentiment towards emerging markets.
Volumes surged towards the close, hitting R22bn, mostly linked to a sell-off in Naspers shares.
The euro fell through $1.18 on the day, reaching a five-month low for the bloc’s currency, following reports from Italy that a coalition agreement between populist parties Five Star Movement and the League revealed plans to defy EU rules. This included the cancelation of €250bn of Italian bonds, bought by the European Central Bank (ECB).
Italian stocks plunged and bond yields shot up by more than 15 basis points on the news.
A new round of China-US trade talks was launched on Thursday in continued efforts to avert a trade war. "It is still difficult to predict how the negotiations will end," said FXTM analyst Jameel Ahmad.
After a flat start, the Dow picked up some momentum in choppy trade. European markets ended the day higher, on the weaker euro.
The all share closed 0.75% lower at 58,184.30 points and the top 40 lost 0.83%. Banks dropped 3.18%, food and drug retailers 2.01%, financials 1.65%, general retailers 1.1%, and industrials 1%.
Standard Bank slumped 3.66% to R203.02.
Naspers closed 1.72% lower at R3,203.99.
MTN lost 2.41% to R118.07.
The rand was at R12.5783 to the dollar from R12.4428 and the euro was at $1.1793 from $1.1807.
The rand lost ground for most of the day, but held up relatively well considering that the dollar has gained more than 2% against the euro so far this month, its best monthly performance since February 2017.
Geopolitical tension and a volatile Turkish lira added to the mix, which weighed on sentiment towards emerging markets. Over the past few sessions, the Turkish lira has hit a series of record lows against the dollar, despite recent increases in interest rates in the country.
Local bonds were relatively steady, with the R186 bid at 8.51% from 8.455%. The US 10-year bond was at 3.1094% from 3.0973%.
After crossing 3% earlier this week, some analysts reckon the yield on the benchmark US 10-year could touch 3.2% in the short term. It rose to a seven-year high of 3.093% on Wednesday, and reached 3.11% in intra-day trade on Thursday, Dow Jones Newswires said.
The top 40 Alsi futures index fell 0.62% to 52,090 points. The number of contracts traded was 14,950 from Wednesday’s 25,127.