JSE closes lower as miners retreat in risk-off trade

19 May 2016 - 20:38 By Maarten Mittner

The JSE closed weaker on Thursday as lower commodity prices damaged sentiment in risk-off trade in the wake of the hawkish US Federal Reserve minutes released overnight. The market showed little reaction to the South African Reserve Bank’s monetary policy committee (MPC) decision to keep the repo rate unchanged at 7%. The Bank revised projected gross domestic product (GDP) growth for this year further downward to 0.6% from 0.8%.The gold price was 0.77% lower at $1‚248.69 a fine ounce and the platinum price retreated 1.54% to $1‚009.75. Brent crude prices shed nearly 2% to $47.50 as the dollar firmed on the Fed minutes‚ which indicated a US rate hike in June was more likely.The Dow Jones industrial average was 0.87% lower at the JSE’s close. This followed the release of another batch of positive US data‚ as jobless claims — the number of Americans seeking unemployment benefits — fell sharply last week to 278‚000 from 294‚000 in the previous week.The probability of a June rate hike has jumped from 4% to 32% after the Federal Open Market Committee (FOMC) said in its April minutes that the market’s expectation for a rate hike was too low. The Dow climbed 7% in March after the previous Fed FOMC meeting.European markets were also weaker on Thursday with the UK’s FTSE 100 losing 1.48% and the French CAC 40 retreating 0.78% by the JSE’s close. The German Dax had lost 1.31%.The JSE all share closed 0.81% lower at 52‚370.10 points and the blue-chip top 40 dropped 0.69%. Platinums led the losers‚ down 6.15%‚ with the gold index losing 5.75% and resources shedding 3.33%. Banks ended the day 0.87% lower and financials retreated 0.75%. Industrials were flat (+0.01%).Stanlib economist Kevin Lings said the Reserve Bank remained concerned that inflation would remain well above the upper end of the target for a protracted period‚ and then become entrenched at a higher average level.According to the Bank‚ the increase in the repo rate at the previous MPC meetings had contributed to the improvement in the longer-term inflation forecast‚ which meant the Bank could afford to hold rates steady in the near-term.“The Bank would likely continue to increase interest rates in the second half of the year and the repo rate could end 2016 somewhat higher at 7.50%‚” Lings said.Risk-off trade has increased this year as foreigners have been significant sellers of South African bonds and equities — R22.3bn has been sold off in May net of purchases. Foreigners have sold R11.1bn of South African equities net of purchases in May.Since December 9 2015‚ after finance minister Nhlanhla Nene was fired‚ foreigners have sold R58.4bn worth of SA’s portfolio assets as political risk has climbed.Among in individual shares on the JSE‚ Anglo American was 5% lower at R132.13.In the gold sector‚ AngloGold Ashanti ended 4.98% lower at R223.29 and Sibanye Gold dropped 8.08% to R47.79.Impala Platinum plummeted 8.70% to R49.52. The company announced late on Wednesday that CEO Terence Goodlace would resign from the group in December.Property group Arrowhead was 0.60% lower at R8.25. It delivered dividend growth of 11% for the quarter to March.Among banks‚ Investec plc was 0.18% lower at R108.16. Total operating income grew 2.5% to £1.9bn and attributable earnings grew 3.2% to £423m‚ its annual results released on Thursday showed.Barclays Africa dropped 1.24% to R136.Old Mutual was 1.35% lower at R37.96.MTN closed 1.91% lower at R125. The telecommunications group said on the day it intended raising its South African investment target by 50%...

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