MARKET WRAP: JSE closes weaker in risk-off trade ahead of heightened US-China tension
The JSE closed weaker on Wednesday as risk-off sentiment gripped global markets ahead of a likely escalation in trade tension.
The local market focus has shifted to global issues following Tuesday’s GDP data that revealed the South African economy was in recession, having contracted 0.7% in the second quarter from a revised 2.6% drop in the first.
Tension over trade between the US and its partners has put pressure on global markets in recent months. The "public comment period" for the US’s proposed new tariffs on more than $200bn worth of Chinese goods is due to end on Thursday, possibly paving the way for US President Donald Trump’s administration to implement the tariffs.
Negotiations between the US and its trade partners have been a source of anxiety for Wall Street, though this has been largely offset by strong corporate results and signs of a healthy domestic economy, Dow Jones Newswires reported.
The Dow was flat at the JSE’s close, with European markets rattled by the intensifying trade war. The FTSE 100 lost 1.15% and the DAX 30 1.12%.
Brent crude was 0.8% lower at $77.17 a barrel, while platinum rose 0.75% to $784.74 an ounce.
The all share closed 1.36% lower at 57,102.10 points and the top 40 lost 1.66%. Banks dropped 2.85%, general retailers 2.07%, industrials 1.75%, financials 1.53% and property 0.9%. Platinums rose 3.77% and the gold index 1.13%.
Naspers dropped 4.02% to R3,055.60.
Nedbank slumped 5.01% to R255.04 and FirstRand 3.33% to R64.82. The former was, however, trading ex-dividend.
MMI Holdings fell 2.49% to R16.85 after reporting annual diluted core headline earnings dropped 12% to R2.8bn.
The rand was at R15.4219 to the dollar from R15.3483 after weakening to R15.697during the day.
Local bond yields have spiked in line with the falling rand but analysts remain wary of calling present levels a good buying opportunity. The recession has raised concern about whether SA will be able to balance its fiscal books, as required by the major credit-ratings agencies. The contents of the medium-term budget policy statement, due on October 24, will be crucial for the country.
"Weak growth implies risks of further fiscal slippage relative to our deficit estimate of 3.8% of GDP for SA in 2018 and the Treasury’s target of 3.6% of GDP," Bank of America Merrill Lynch said.
The R186 was last bid at 9.24% from 9.22%.
The top 40 Alsi futures index dropped 1.28% to 50,780 points. The number of contracts traded was 26,182 from Tuesday’s 27,605.