JSE opens to a sea of red

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The Johannesburg Stock Exchange. Photo: Getty Images
The Johannesburg Stock Exchange. Photo: Getty Images

BUSINESS


It was a sea of red at the JSE open on Thursday morning as the local bourse took its cue from Asian and US markets.

Kieran Siney, co-head of financial markets at ETM Analytics, said the JSE was headed towards a gloomy session on the day:

The sharp drop in [internet and technology giant] Tencent and prevailing risk-off conditions point to a gloomy session ahead for technology giant Naspers. While much of the direction for local stocks in the first half of the session will stem from external conditions, we have the Reserve Bank decision this afternoon, which will be of great importance for investors.

The All Share index was down 1.13% to 68 304.94 in early morning trade. The Top-40 blue chip index was down 1.14% to 61 784.67.

Resources led the declines at the start of trade, losing 1.53% to 70 695.99. Financials were down 1.38% to 15 804.48, while the industrial index lost 0.73% to 76 242.82.

Overnight, Wall Street dropped to its lowest level in nearly two years with the Nasdaq leading the declines – falling more than 4%.

Siney said:

Disappointing results from US consumer heavyweights added to the headwinds for global stocks yesterday, raising fears that soaring inflation is hurting profits and consumer spending. Consumer discretionary stocks in the US fell the most since March 2020.

The Nasdaq was sharply down, losing 4.73% to 11 418.15. The S&P 500 lost just over 4% to 3 923.68, while the broader Dow Jones Industrial Average shed 3.57% to 31 490.07

European markets were expected to follow the global markets declines on Thursday. They closed in the red on Wednesday as debate raged over whether the world economy was heading towards a recession, fuelled by rising inflation and Russia’s invasion of Ukraine.

The UK’s FTSE 100 was down 0.78% to 7 380.20; Germany’s DAX shaved off 1.21% to 13 837.90; and France’s CAC40 lost 1.16% to 6 279.41.

Asian stocks plummeted on Thursday morning following the steep sell-off on Wall Street on Wednesday. Tencent led the declines, pulling other tech stocks down. This as investors continue to worry over rising global inflation. China’s zero-Covid policy helped drive investor jitters as there were doubts that the second largest economy in the world would achieve its projected 5% economic growth.

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Japan’s Nikkei lost nearly 2% to 26 402.84, while China’s Shanghai Composite index bucked the trend and gained 0.23% to 3 093.14, and Hong Kong’s main Hang Seng Index shed 2.34% to 20 161.00.

In the currency market, the rand was trading at R16.06/$; R19.86 to the British pound and R16.83 against the euro.

Also offering direction to traders this afternoon will be the Reserve Bank’s decision on interest rates.

Siney said while there was a strong case for a 50-basis points hike, the central bank could be less aggressive: 

South Africa is a starkly different economy from that of the US, and the Reserve Bank was more pre-emptive than the Federal Reserve.

“Not only did the Reserve Bank pre-emptively hike rates, but it didn’t embark on an aggressive quantitative easing programme during the pandemic, which the Federal Reserve needs to unwind.”

“Moreover, economic growth in South Africa is weak, with unemployment at a record high. Inflation is also still within the Reserve Bank’s 3% to 6% target range, therefore there is a solid case to be made for a 25-basis points hike.”

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Brent crude oil was staging a comeback on Thursday morning after two consecutive days of losses. It was trading at $110.41 (R1 771.82) per barrel.

Gold was trading at $1 814 an ounce, and came under pressure as “the focus turned back to the trajectory for US rates following stern comments from Federal Reserve chair [Jerome] Powell earlier in the week, when he stated that the Federal Reserve would hike rates as high as needed to stop the surge in domestic inflation, which he said threatens the foundation of the economy. Powell’s comments are keeping US Treasury yields lofty, reducing the appeal of non-yielding gold,” Siney said.

Silver was down 0.29%, trading at $21.39 an ounce.


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