JSE braces for rough day as Ukraine crisis worsens

The JSE braced for a rough session on Tuesday after tensions between Russia and Ukraine intensified, sending already jittery global markets into a tailspin.

Russia recognised two breakaway regions in Ukraine, drawing criticism from the US and Europe and dealing a blow to efforts to resolve the matter through diplomatic channels. The US and some EU countries have said they will impose sanctions on Russia.

Hong Kong’s Hang Seng index and Japan’s Nikkei 255 tumbled 3% and 2%, respectively, while US stock futures pointed to a sharply weaker open on Wall Street later on Tuesday.

Brent crude was within a hair’s distance of the psychologically important barrier of $100 a barrel after rallying to a fresh seven-year high to stand at $97 a barrel. The consistently higher international oil prices could stoke further increases in fuel prices in SA, which could worsen the outlook on inflation.

The rand was resilient on balance given the global risk-off scenario. SA’s currency was just off 0.21% to R15.17/$, insulated in part by higher commodity prices, notably platinum group metals.

Foreign investors have been strong net buyers of SA bonds. Over the past week, they bought R7.3bn worth of bonds, stretching net inflows to nearly R30bn since the start of the 2022, according JSE data. Over the past week, they bought just more than R4bn in shares on a net basis, further supporting the rand.

The geopolitical tensions triggered a flight to safety, leaving gold price at its highest level in eight months about $1,900oz, which will support JSE-listed gold stocks.

Other perceived safe-haven assets such as US treasuries and Japan’s yen were well supported on the day. The yields on the US 10-year paper drifted lower to 1.8595%, the lowest since early February.

mahlangua@businesslive.co.za