MARKET WRAP: JSE and rand wilt as global risk sentiment weighs

The JSE closed lower on Tuesday in line with its foreign counterparts as a combination of factors weighed on global risk sentiment.

The rand also came under pressure, falling to a one-month low against the dollar as heightened international tensions supported the US currency.

A missile strike on a US-owned ship in the Arabian Gulf and Donald Trump’s overwhelming win in the Republican Iowa caucus has seen risk-off in markets and a stronger dollar, said Andre Cilliers, currency strategist at TreasuryONE. 

Hawkish comments from the World Economic Forum in Davos have seen markets trim some bets on the timing and pace of central bank rate cuts, he added.

The JSE all share index closed down 0.91% at 73,007.62 points, while the top 40 shed 0.96%. Most of the major indices were lower, with the precious metals and mining sector losing 2.24%, resources 1.55% and industrials 1.04%.

At 5.54pm, the Dow Jones industrial average was off 0.36% at 37,457.01 points, while London’s FTSE 100 was down 0.35%, France’s CAC 40 eased 0.21% and Germany’s DAX retreated 0.27%.

“The prospect of a renewed trade war with China and the reimposition of tariffs, if Trump gets re-elected, are likely to see a stronger dollar in the longer term, while the escalation in the Middle East conflict is supporting the greenback in the short term,” said Cilliers.

The local unit weakened to the R18.80/$ level on Tuesday morning as all risk-sensitive currencies weakened in the face of the stronger dollar.

“A break above the R18.85/$ level could see the rand weaken further towards the R19/$ mark,” Cilliers added. “Short-term risks to the local currency are turning negative due to geopolitical and global monetary policy uncertainties,” he said.

At 5.40pm the local unit had weakened 1.31% to R18.9373/$, 0.61% to R20.6076/€ and 0.71% to R23.967/£.

Gold was also lower, due mainly to the stronger dollar after the metal had attracted safe-haven demand stemming from the Middle East tensions over the past few days.

At 5.33pm, gold was 0.74% softer at $2,039.597/oz and platinum was down 1.1% at $904.40/oz.

Gold remains buoyed by aggressive rate-cutting expectations, ​ particularly in the US, but at the same time it is struggling to generate fresh momentum around the prior record highs, near $2,070 an ounce, said Oanda senior market analyst Craig Erlam.

“We obviously saw a spike in early December well above this but the timing of the move and the speed with which it reversed it suggests the market was never fully behind it, so the prior highs continue to look like a significant psychological threshold.”

Oil prices remain choppy amid the uncertainty in the Middle East after the US and UK attacks on Houthi targets, said Erlam.

“We haven’t seen a significant increase in the price of oil on the back of the attacks but the brief spikes we’ve seen have highlighted the sensitivity in the market to events around the Red Sea,” he said. Brent crude was 1.05% lower at $77.81 a barrel.

mackenziej@arena.africa