MARKET WRAP: JSE weakens as geopolitics keep investors on edge

The JSE ended lower on Wednesday as events in the Middle East kept investors on edge.

The global anxiety is best captured in the gold price, which has risen almost 5% to $1,943.44/oz this month after the long-standing conflict between Israel and Palestine erupted anew last week. Gold is traditionally a safe-haven asset during bouts of uncertainty.

Investors are mainly concerned about the potential spread of the conflict throughout the region and its impact on the global economy.

“Up until around 10 days ago the situation in the Middle East had appeared very calm on a relative basis. While there has clearly been a reaction in safe-haven assets over the past week or so, this has lacked any signs of panic to date,” said Jane Foley, head of FX strategy at Rabobank London.

'The real risk from a market perspective is a spreading of the conflict which could affect the supply of oil. It would appear that the visits by US President Joe Biden and Secretary of State Antony Blinken to Israel and the other regional talks that have been taking place have allowed investors to view the situation from a ‘glass half-full’ perspective.”

The situation adds a further layer of complexity to markets which are also dealing with the fallout of the ongoing Russia-Ukraine war as well as uncertainty about the direction of US interest rates.

The JSE all share shed 1.19% to close the session 71,968.67 points, in line with its global counterparts, while the heavyweight top 40 fell 1.21%.

Platinum group metal shares led losses in the resources sector, with Impala Platinum plunging 7.7% to R88.60 in line with weaker underlying prices. Still gold shares held up well on the day on account of the rising bullion price.

Banks and insurers were also under pressure, along with retailers, as the rand weakened beyond R19/$, amid global risk-off trade.

Pick n Pay crashed 12.45% to R25.95, the lowest since 2008, after the grocery retailer reported its first-ever interim loss.

However, mega-cap industrial stocks such as British American Tobacco and Richemont gained more than 1% each, keeping losses on the overall market in check.

The rand was 1.3% weaker at R19.04/$ by just after 6pm, while Brent crude gained marginally to $91.15 per barrel.

The Dow Jones industrial average was 0.35% weaker at 33,878.24 points by 7.13pm, while the broader S&P 500 eased 0.62%. Markets in Europe ended the day around 1% weaker.

mahlangua@businesslive.co.za