Donald Trump's unpredictable behaviour played havoc with SA’s markets, with the JSE posting its biggest drop in more than a month after the US president’s sudden threat to increase tariffs on Chinese imports sparked a fresh round of risk aversion.

The rand fell more than 1% as emerging-market currencies, vulnerable to a slowdown in trade that hurts global growth, dropped in the wake of Trump’s tweets on Sunday, which caught traders off guard. Markets have been relatively calm in recent months on optimism that a breakthrough in US-China trade talks was on the cards.

“Trump's tweet is a reminder that the global economy heavily influences SA, and in turn is heavily influenced by Trump,” said South African Institute of Race Relations chief economist Ian Cruickshanks.

The JSE’s all share index closed 1.05% weaker at 58,712.8 points, more than giving back Friday’s gains. That cut its 2019 rise to 11.33%, after dropping in 2018 by the most in a decade.

The local currency fell 14c over the weekend and was at R14.5066/$ as the JSE closed. It is 9.5% weaker since reaching its 2019 best on January 31.

The rand had been boosted by investor demand for higher-yielding assets in the wake of the US Federal Reserve’s decision to pull back from its intention to raise interest rates. 

Volatility in the rand has picked up ahead of Wednesday’s election, which promises to be the most hotly contested of the democratic era. One-week implied volatility was just above 17%, the most among emerging-market currencies, according to Bloomberg data.

The currency has been falling ahead of the elections with polls giving conflicting signals on the expected margin of victory for the ANC. Analysts have said a decisive victory for the ANC, close to 60%, would boost local assets on expectations that President Cyril Ramaphosa will then be emboldened to push on with pro-growth reforms.

The run up to the poll has seen “some uncertainty build domestically, limiting what otherwise may potentially have proved to be material appreciation of the rand on the increasingly neutral US monetary policy communication this year,” Investec economist Annabel Bishop said in a note. Pollsters have “ shown diverging results on the degree of voter support the ANC is likely to garner” and this “has fed the uncertainty”, she said.

The escalation in the trade war pushed stocks down across the world, with China's CSI Index falling 5.58%, the biggest drop in more than three years. US stocks also opened weaker with the S&P 500 down 1% by 6.15pm South African time.

Election results may not provide a clear answer on the prospects for economic reform because they might still be inconclusive on the balance of power within the ANC, Old Mutual Investment fund manager John Orford said in a note.