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Picture: 123RF/NIRUT
Picture: 123RF/NIRUT

The JSE could be on track for another difficult session on Tuesday morning, with Wall Street again posting sharp losses overnight and the market still adapting to a deteriorating global economic outlook.

Major central banks are acting rapidly to contain inflation that has reached multi-decade highs, with tougher lending conditions coming even as the world deals with the shock of Russia’s invasion of Ukraine, while China is still battling with Covid-19.

The JSE has lost almost 10% so far in 2022, and after five-consecutive sessions of losses, is back at a level last seen in October 2021. The US S&P 500 is back at levels last seen a year ago. 

An optimistic reading of current equity market valuations is that they have declined substantially, and much of the froth has come out, including in the overvalued technology firms, said Old Mutual Wealth Investment Strategist Izak Odendaal in a note.

The forward price to earnings ratio of the S&P 500 is back to pre-pandemic levels at 17, while the global benchmark MSCI all country trades at 15 times forward earnings, he said.

“As long as central banks don’t hike the global economy into recession, valuations now seem reasonable,” said Odendaal. “However, the risk of them doing so has clearly increased.”

The tech-heavy Nasdaq fell more than 4% on Monday, while in morning trade on Tuesday the Hang Seng lost 2.83% and Japan’s Nikkei 0.87%, while the Shanghai Composite added 0.17%.

The Hang Seng was closed on Monday for a public holiday.

Tencent, which influences the JSE via Naspers, gave back 3.67%.

Gold was up 0.53% to $1,863.84/oz, while platinum rose 0.73% to $971. Brent crude was down 0.31% at $104.49 a barrel.

The rand firmed 0.66% to R16.107/$, having lost 1.29% on Monday.

Kaap Agri, whose interests span retail, fuel, farming and manufacturing, is due to report that headline earnings per share rose more than 10% in its half-year to end-March, but did not go into detail in its recent trading update.

gernetzkyk@businesslive.co.za

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