JSE expected to go lower as it plays catch up on Tuesday

The JSE is likely to go lower on Tuesday as it plays catch up with other world markets after the long weekend in SA.

Asian share markets were narrowly mixed while the Dow futures suggested a weaker start on Wall Street later in the day.

The spread of the highly transmissible Delta variant and the extent to which it could derail the recovery of the world economy remain a concern for investors.

The spot price of Brent crude stabilised on Tuesday, after closing 2% weaker as the spread of the Delta variant in China raised demand concerns, and the dollar strengthened.

Brent crude has fallen 10% since reaching $77 a barrel in early June, which was the highest since October 2018. However, it was flat at $69 a barrel.

Lower oil prices could potentially provide relief to consumers and business via reduced fuel prices. But JSE-listed shares of Sasol and MTN, which are sensitive to movement in oil prices, could go lower.

Elsewhere, the rand was flat against the dollar, but weaker compared with Friday’s levels. The rand exchanged hands to the dollar at R14.77/$, compared with intraday levels of R14.4395/$.

The weaker rand is due to a stronger dollar, which was boosted by robust US nonfarm payrolls report on Friday. The US economy added 943,000 jobs in July, beating consensus forecasts of 926,000 by a Reuters poll.

The blowout jobs report bolstered speculation that the US Federal Reserve could scale back its monetary stimulus.

The gold price was up 0.35% to $1,735.44oz, after falling sharply in the wake of the US nonfarm payrolls report. Gold typically performs poorly in the higher interest rates environment and/or when investors expect interest rates to rise.

The lower gold price environment could further hit JSE-listed gold shares, which fell sharply on Friday.

mahlangua@businesslive.co.za