MARKET WRAP: JSE falls as treasuries cause uncertainty
Higher treasury yields in the US indicate a drop in safe-haven trade as confidence in a strong US economy reaches new heights
The JSE closed weaker on Friday, ending a disappointing week, as uncertainly grips global markets amid spiking US bond yields.
The US 10-year treasury yield rose to a seven-year high of 3.2344% during the week. This indicated a drop in safe-haven demand from the market, with investors showing confidence in the strong US economy, and investors of the view that further interest-rate hikes can be absorbed.
However, this is likely to strengthen the dollar, placing developed equity markets on the back foot.
The all share closed 1.13% lower at 54,409.50 points on Friday and the top 40 dropped 1.33%. Resources shed 1.99%, banks 1.43%, industrials 0.97%, general retailers 0.8% and property 0.62%. The all share ended the week 2.33% lower, bringing losses over the past fortnight to nearly 5%.
On Friday, Naspers lost 1.16% to R2,889.99 and Standard Bank 1.68% to R163.21.
Next week will be another quiet one on the economic calendar, with August’s manufacturing and mining numbers on Thursday the highlights. August motor trade sales will be released on the same day.
While next week’s third-quarter earnings releases in the US are likely to move markets, starting with US financial companies such as JPMorgan Chase and Citigroup, local company results will be on the thin side.
Property group Equites is set to release interims on Thursday. In a pre-close presentation in August, the group highlighted that, despite a weak economy, tech vacancies in the industrial sector are at a historic low of 1.8%. It closed flat at R20.11 on Friday. It gained 32.9% last year, but is down 4.24% in 2018.
Taste Holdings, owners of the local Starbucks and Domino’s Pizza franchises, will release its interim numbers on Friday. It plunged 7.41% to 25c on Friday as the market expects an earnings before interest, tax, depreciation and amortisation (ebitda) loss of R186.6m for the half year to end-August.
The rand was firmer on Friday afternoon as US non-farm payroll data came in lower than expected. Job numbers rose by 134,000 in September from a revised 270,000 in August, but less than the predicted 201,000. The unemployment rate improved to 3.7% from 3.9%.
Average hourly earnings, the closely watched gauge for inflationary pressures in the US economy, rose an annual 2.8% from 2.9%, as expected. This once again indicates that inflationary pressures remain muted in the US.
The rand was last seen at R14.7499 to the dollar from R14.8676. The euro was at $1.1513 from $1.1514.
Local bonds were under pressure with the R186 bid at 9.235% from 9.19%. The US 10-treasury was last seen at 3.2163% from 3.1849%, while the Dow Jones industrial average was 0.56% lower soon after the JSE’s close.