MARKET WRAP: Rand reverses all of 2019’s gains, and falls further

The rand weakened steadily throughout Monday, as local factors such as the country’s poor economic outlook and problems at state power utility Eskom pushed it to its third consecutive day of losses.

The local currency reached its lowest level in a month and is now down 3.28% against the dollar in 2020. It gained 2.46% for the whole of 2019, so all those gains have now been erased, and then some.

At 5.24pm, the rand had weakened 0.8% to R14.4537/$, 0.89% to R16.0836/€ and 0.4% to R18.7741/£. It reached an intraday worst level of R14.4743/$.

China’s vice-premier Liu He is expected to travel to Washington on Monday, ahead of the possible signing of the first phase of a trade deal with the US later this week. This will mark progress in the protracted trade war between the world’s two biggest economies.

Bloomberg reported earlier that the deal would involve some tariff relief, increased Chinese purchases of US agricultural goods and changes to intellectual property and technology rules.

Meanwhile, Washington and Beijing have agreed to hold semi-annual talks aimed at resolving disputes and to push for reform.

Earlier, the Shanghai Composite was up 0.75% and Hong Kong’s Hang Seng 1.11%.

In Europe, the FTSE was flat, France’s CAC 40 down 0.17% and the German DAX 30 0.32% lower.

The JSE ended the day a little firmer, with investor attention fixed on the White House this week.

The JSE all share was up 0.15% at 57,572.7 points and the top 40 0.19%. Resources gained 0.62% and platinum miners 0.19%. Banks fell 1.09% and financials 0.84%.

“Outside of SA, the US and China are expected to sign the phase-one trade deal on Wednesday. This step should boost global risk sentiment and support not only stock markets but emerging-market assets”, FXTM senior research analyst Lukman Otunuga said.

“Oil prices were explosively volatile last week amid geopolitical shocks. Although the commodity has entered this week on a calmer note, any signs of renewed tensions between the US and Iran could influence oil. Emerging-market crude consumers such as SA could feel the impact of higher oil prices as this indirectly impacts transportation and manufacturing, households and businesses,” Otunuga said.

Gold, which performed well during the recent US-Iran crisis, and capped its fifth week of gains on Friday, was lower on Monday as global risk sentiment improved. At 5.43pm it was down 0.59% to $1,552.86/oz. Platinum had fallen 0.79% to $968.2 and Brent crude 1.23% to $64.22 a barrel.

Retailer Massmart said on Monday that its planned to shut a total of 34 of its DionWired and Masscash stores. The latter is the group’s wholesale division, which includes cash and carry, food and cosmetics outlets, while the former supplies electronics and appliances. The move comes as a result of underperformance by these stores in the tough SA economy. It is envisaged that the closures will result in as many as 1,440 job losses. Massmart’s share price leapt 5.8% to R51.64 on the news.

In the weaker rand environment, Absa led losses among the big-four banks, down 1.73% to R140.92. It was followed by FirstRand, off 1.46% to R59.32, Standard Bank down 0.64% to R163.82 and Nedbank 0.55% lower to R210.22.

tsobol@businesslive.co.za