MARKET WRAP: JSE weakens as global sentiment sours

The JSE fell on Wednesday, with platinum miners faring worst, as risk appetite abated amid yet another sign the US-China trade war is far from over.

US President Donald Trump threatened new import tariffs on Chinese goods on Tuesday, saying the country had failed to live up to a pledge to increase purchases of US farm products.

US retail sales numbers for June also weighed on emerging markets, with the consensus-beating data slightly reducing market expectations of a 50-basis-point (bps) cut by the US Federal Reserve later in July.

Asian and European markets were under pressure, with US markets retreating further from record highs set earlier in the week.

The JSE all share fell 0.72% to 57,636 points and the top 40 0.76%. Banks lost 1.98% and platinums 3.69%.

The Dow was down 0.22% to 27,275.76 points, while in Europe, the FTSE 100 had fallen 0.43%, the CAC 40 0.59%, and the DAX 30 0.71%.

Shortly after the JSE closed gold was up 1.02% to $1,420.02/oz and platinum 1.01% to $846.61. Brent crude was 0.12% lower at $64.22 a barrel.

Statistics SA earlier reported retail sales grew 2.2% year-on-year in May, beating the Bloomberg consensus for a rise of 1.7%. The figures confirm that the economy is set to record growth in the second quarter following a contraction in the first, as consumer spending accounts for about 60% of GDP, said Nedbank Group Economic Unit analysts. “However, the general economic environment remains subdued.”

Naspers fell 1.47% to R3,442.72.

Impala Platinum slumped 5.83% to R70.10. It earlier offered bondholders the ability to redeem its $250m convertible bond due in 2022, seeking to use a cash windfall from good recent platinum prices to reduce high interest payments on the bond.

EOH fell 3.38% to R20, extending Tuesday’s 0.77% loss. It said then that an investigation into its past dealings with the government uncovered “suspicious transactions” worth R1.2bn.

Altron gave back 1.41% to R27.90. It said earlier that a court had set aside the City of Tshwane’s municipal broadband contract, in which the technology group was involved, because the tender process was unlawful. The estimated cost of this to the company will be between R40m and R60m.

Local focus on Thursday is squarely on the Reserve Bank’s interest-rate announcement, with the consensus among 22 analysts polled by Bloomberg that the Bank will cut the repo rate by 25 bps. There is also the possibility that SA could get another cut in September, should the US Federal Reserve ease monetary policy.

Investec chief economist Annabel Bishop wrote in a note: “With the aggressive hikes in US interest rates in 2018 coming to an end as global equity markets saw a virtual collapse, the tone of monetary policy became increasingly dovish, and over the course of 2019, central banks globally are now tending towards easing.” 

gernetzkyk@businesslive.co.za