MARKET WRAP: JSE gains as Reserve Bank cuts repo rate

The rand extended losses while the JSE concluded its fourth consecutive day of gains on Thursday as investors pondered a widely unexpected 25-basis-point repo-rate cut by the Reserve Bank.

Shortly after the announcement, the rand erased earlier gains and now looks on track for its third consecutive week of losses.

At 5.23pm, the rand had weakened 0.31% to R14.4336/$, after strengthening to as much as R14.35 earlier, 0.16% to R16.0686/€ and 0.3% to R18.8148/£. The euro weakened 0.15% to $1.1133.

The R2030 government bond was stronger with the yield falling three basis points to 9.025%. Bond yields move inversely to their prices.

The Bank cut the repo rate to 6.25% on Thursday, its first change since July 2019, while the median forecast among economists polled by Bloomberg was for rates to be kept on hold.

“The key rate now sits at its lowest level [in years], but judging by the sanguine reaction of markets, investors were anticipating the cut more than the analysts’ projections suggested,” said Monex Europe forex market analyst Simon Harvey.

“The [rate cut] is indeed good news for the economy, in dire need of stimulation. It could assist struggling households and businesses on the margin and boost confidence levels a bit; small positives though, which will unfortunately not change the narrative of low economic growth and, in all probability, a further uptick in the unemployment rate of the country,” said independent economist Elize Kruger.

Gold was down 0.4% to $1,550.10/oz and platinum 2.09% to $1,005.85. Brent crude was up 0.48% at $64.61 a barrel. 

US stocks opened on the front foot on Thursday as the signing of the first phase of a trade deal between the US and China on Wednesday lifted investor sentiment. As part of the deal, China has pledged to purchase about $200bn worth of US goods and services over the next two years.

“We’re now in a weird limbo between a deal that papers over cracks and a full, comprehensive deal that may take years, if it comes at all. There’s relief at the situation progressing in a positive way that removes some uncertainty, but disappointment that tariffs remain in place, and will for the foreseeable future,” said Oanda senior market analyst Craig Erlam.

Shortly after the JSE closed, the Dow was up 0.56% to 29,194.32 points. In Europe, the FTSE 100 was down 0.46% and Germany’s DAX 30 0.16%, while France’s CAC 40 was flat.

Earlier, the Shanghai Composite fell 0.52% while Hong Kong’s Hang Seng gained 0.38% and Japan’s Nikkei was flat. 

The JSE all share gained 0.26% to 58,217.4 points and the top 40 0.25%. Gold miners rose 1.35%, the platinum index 2.86% and resources 1.16%.

South32 said on Thursday that it had lowered its production guidance for 2020 at its SA coal business due to wet weather and weak domestic demand. Its share price gained 0.89% to R28.26.

Anglo American gained 1.91% to R410.64, BHP 1.57% to R340.86 and Glencore 2% to R45.50.

Anglo American Platinum rose 1.91% to R1,377.89, Sibanye-Stillwater 3.85% to R37.22, and Impala Platinum 3.11% to R149.94.

mjoo@businesslive.co.za