JSE opens flat as rand plummets on Turkish contagion
Trade is thin in local stocks as pressure on the Turkish government takes its toll on emerging markets and as the US proposes new sanctions on Russia
The rand weakened to R13.9823 against the dollar in early-morning trade, after starting the week at R13.3128, bringing losses for the year to 12%.
A weaker rand normally supports rand hedge shares and miners on the JSE, but investors were clearly adopting a cautious stance in thin trade on a day that many traders are away for a long weekend after Thursday’s National Women’s Day.
The lira tumbled more than 10% against the dollar, to reach a record low of 6.2513 lira to the greenback. It has weakened 54% so far this year.
The lira has been under pressure for the past few months as Turkish president Recep Tayyip Erdogan tightened his grip on fiscal and monetary policies following an election victory.
The latest setback for the Turkish currency came after Erdogan threatened "economic war" against the US after the Trump administration implemented sanctions against Turkey after the arrest of a US pastor in Turkey. The Turkish central bank has so far refused to hike interest rates further to support the Turkish currency.
The dollar gained on the euro, with the European currency falling through $1.15 to $1.1432, as analysts predict the dollar could rally a further 5% against the euro.
The lira’s fall has affected European banks negatively, as some have large investments in Turkey. The European Central Bank (ECB) has expressed its concern about developments, as some Turkish banks might begin to default on foreign-currency loans.
On Thursday, the Russian rouble hit its lowest level against the dollar in two years, after the US announced fresh sanctions over the Novichok poisoning case in Salisbury, England.
The US said it would impose sanctions later in August, after concluding that Russia used the Novichok nerve agent to poison Sergei Skripal and his daughter Yulia.
Brent crude was 0.6% off at $71.5 a barrel. The gold price showed little response as a safe-haven investment in the light of the rampant dollar, softening 0.34% to $1,208.028/oz. However, gold stocks on the JSE were sharply higher.
The Dow closed 0.29% lower on Thursday. Asian markets were weaker on Friday with the Nikkei 225 losing 1.33% and the Hang Seng 0.77%.
At 9.38am the all share was 0.03% lower at 57,766.80 points. The top 40 also softened 0.03%. Banks dropped 2.56%, financials 1.3%, property 0.72% and food and drug retailers 0.67%. The gold index added 2.78%, platinums 1.73% and resources 0.75%.
BHP gained 0.68% to R299.56, but Anglo American slipped 0.61% to R296.28.
AngloGold Ashanti rose 3.43% to R117.56 and Gold Fields 2.31% to R48.22.
Standard Bank shed 3.52% to R189 and FirstRand 2.83% to R65.93.
Shoprite softened 1.66% to R215.13.
Nepi Rockcastle dropped 0.67% to R119.44.
Naspers was 0.06% lower at R3,349.90.