JSE could take a breather on Thursday as Asian markets fall
The JSE, which reached its best level in more than seven months on Wednesday, could pare some of those gains on Thursday as Asian markets retreat even after the UK and EU agreed to extend the deadline for their divorce.
The UK and EU agreed to extend the Brexit deadline by six months to allow Britain to find a workable solution. UK Prime Minister Theresa May has so far been unable to get enough support from legislators for her exit strategy.
Also on Wednesday, the European Central Bank kept interest rates unchanged and warned of slower growth in the region, while minutes from the US Federal Reserve’s recent monetary policy meeting showed that officials have not ruled out the possibility of a rate hike in 2019.
Asian stocks were mostly lower on Thursday. Hong Kong’s Hang Seng Index was 0.9% lower at the lunch break, while the Shanghai Composite was 1.4% down and Australia’s main benchmark declined 0.3%. Japan’s Nikkei 225 index and Korea’s main benchmark were both flat, while equities in Singapore rose 0.2%.
Naspers’s main asset, Hong Kong-listed Tencent, continued to rally. The stock, up 0.8% on the day, is at its best level since July 2018.
Naspers, meanwhile, is at its best level since January 2018 after adding 2.2% on Wednesday.
BHP Group, the third-largest constituent of the JSE’s top 40 index, was 0.6% lower in Australia.
Stats SA is scheduled to publish mining and manufacturing data for February on Thursday. In the US, the producer price index and jobless claims data are due.
The rand, which strengthened past R14/$ on Wednesday, was slightly weaker in early trading on Thursday. It was 0.2% down against the dollar at R13.93, 0.3% weaker against the pound at R18.26 and 0.2% down against the euro at R15.71.
Nigel Green, CEO of financial advisory firm deVere Group, said in a statement the pound was likely to stage a “relief rally” as investors digest the news that Brexit negotiations have longer to run and the UK will not crash out of the EU on Friday.
“The likelihood of a softer Brexit is significantly increased; a softer Brexit would be welcomed by businesses in the UK and those around the world that trade with Britain.
“This medium extension period also makes a second referendum — a ‘confirmatory vote’ on any deal the parliament finally agrees to — more likely, and with that a good chance of Brexit being voted down,” Green said.