Johannesburg - Global stock markets were a sea of red on Wednesday morning and investors on the JSE also joined the flight to safety, buying bonds and precious metals.
With the dollar also down, resources shares in particular were sharply lower with major commodity giants such as BHP Billiton [JSE:BIL] and Glencore [JSE:GLN] losing more than 5% in early morning trade.
The Resources index was at that stage already almost 3% down, with the All-share index losing 1.80% to 51 802 points and the Top 40 index trading 1.80% softer at 44 563 points.
Asian markets posted their biggest drop in two weeks and the major European markets were almost 1% softer in early trade, as growing doubts about President Donald Trump's economic growth agenda prompted investors to dump risky assets and rush to safe havens such as gold and government debt. The Dow Jones Index on Wall Street lost more than 1% on Tuesday night in heavy trading.
Investors see the Trump administration's struggles to push through the healthcare overhaul as a sign he may also face setbacks delivering promised corporate tax cuts. Expectations of those cuts have been a major driver behind the 10% surge in the S&P 500 since Trump's election and a subsequent rally in emerging markets since late December.
The flight to safety is also bad news for the dollar, which dropped to the lowest level in four months against the yen in early trade.
A strong dollar is good news for precious metals with gold trading comfortably at a two-week high of $1 245 per ounce, but commodities other than gold dropped sharply with a steep fall in copper and iron prices. The copper price hit a two-week low.
The result was that the Resources index at mid-morning was already 2.95% lower, but the Gold index gained 4.24%. Sibanye [JSE:SGL] traded 6.15% higher at R29.31, Harmony [JSE:HAR] gained 5.03% to R30.51 and AngloGold Ashanti [JSE:ANG] was 3.54% stronger at R143.22.
Among the top commodity shares BHP Billiton and Anglo American [JSE:AGL] both dropped back to below R200 per share. BHP Billiton at mid-morning was 5.35% softer at R197.13, and Anglo American lost 4.48% to R192.01. Glencore was one of the busiest shares on the JSE with more than 2 million shares being sold; the share price dropped 5.45% to R51.20.
Kumba Iron Ore [JSE:KIO], one of the star performers on the JSE over the past year, dropped 5.35% to trade at R210.33.
The rest of the market was also substantially down, with the Industrial index losing 1.87%. Most of the big dual-listed shares on the JSE, which represent more than half of the market’s value, are part of this index and followed their European counterparts sharply lower.
They were also hampered by the strong rand which traded as high as R12.63 to the dollar, the lowest level since June 2015. The rand later dropped back to R12.67/dollar.
There was a great deal of interest in Naspers [JSE:NPN] in anticipation of the results announcement later on Wednesday by Tencent, the Chinese internet giant in which Naspers owns a 34% stake. On Tuesday Tencent stood at a 52-week high in Hong Kong but dropped back 1.57% on Wednesday. Naspers followed and at mid-morning was already 2.71% lower at R2 229.00.
Some of the other big shares also traded sharply lower. Richemont [JSE:CFR] was 2.44% softer at R96.19 and Steinhoff [JSE:SNH] lost 2.05% to R63.47.
There was also some profit-taking in the financial sector, with the Financial index trading lower. Sanlam [JSE:SLM], which closed on a 52-week high of R72.42 on Tuesday evening, lost 2.71% to R70.41 in early morning trade.
Alexander Forbes [JSE:AFH] was by far the busiest share on the JSE with more than 4 million shares being sold, but at mid-morning the stock was unchanged at R6.38.