JSE closes weaker as elusive Merkel coalition deal rattles global markets
The Johannesburg Stock Exchange (JSE) closed lower on Monday in renewed risk-off trade as German chancellor Angela Merkel struggles to keep her coalition together‚ and local data reflected a moribund manufacturing sector.
A late recovery in banks and general retailers pared some of the losses of the day.
Platinum stocks had a good day‚ despite the platinum price retreating 1.7% to $835.85 an ounce. Global miners were lower as Brent crude dropped 1.7% to $77.87 a barrel.
Naspers dropped 2%‚ eroding some of Friday’s gains when it rocketed more than 6%. It closed 2.22% lower at R3‚407.73.
Volumes were lower than average on the day‚ at about R12-billion‚ after the Hang Seng was closed for a public holiday.
At the JSE’s close‚ German interior minister Horst Seehofer was involved in last-minute talks with Merkel’s Christian Democratic Union of Germany‚ after earlier threatening to resign in protest against an EU deal on migrants reached last week.
A sharply weaker euro was an indication that the market was not very hopeful that an exit by Seehofer could be avoided‚ placing Merkel’s three-month old — and carefully constructed — coalition in jeopardy.
Reports surfaced at the weekend that the EU was also considering imposing almost $300-billion in retaliatory tariffs on the US‚ should that country target European car imports.
Other reports stated that US President Donald Trump was considering ditching the World Trade Organisation‚ which sets rules regarding the extent to which countries may impose protectionist measures.
Strong economic growth in the US had underpinned equities so far‚ but geopolitical uncertainty and protectionism remained the key downside risks‚ said FXTM analyst Hussein Sayed.
He said markets were in the late stage of the upswing in the current economic cycle‚ but there were no signs of a recession yet. Equity investors should‚ however‚ remain cautious.
"A more selective approach is needed as valuations are likely to be further challenged in the months ahead‚" Sayed said.
The Dow ended the second quarter 0.7% higher‚ after retreating 2.49% in the first. It was 0.3% off at the JSE’s close‚ following in the footsteps of weaker European and Asian markets.
Locally‚ the Absa purchasing managers index came in at 47.9 index points in May — its weakest reading since March.
The all share closed 0.78% lower at 57‚159.60 points and the top 40 lost 1.04%. Resources shed 1.84%‚ industrials 0.86% and property 0.45%. The platinum index climbed 2.2%‚ general retailers 1.17% and banks 0.65%.
Anglo American ended the day 2.48% lower at R299.80.
Nedbank rose 2.46% to R255.73 and FirstRand 0.53% to R64.23.
Old Mutual dropped 1.04% to R27.50.
Steinhoff rose 6.2% to R1.37. On Friday‚ it restated its numbers on goodwill and asset value‚ with losses coming in at €12.8bn‚ more than double the December 17 estimate of €6bn.
Mr Price climbed 0.92% to R228.34 and Woolworths 0.31% to R55.62.
Nepi Rockcastle dropped 0.85% to R121.42.