MARKET WRAP: JSE flat as rand hedges offset retailer gains

31 January 2019 - 19:15 By Karl Gernetzky

After a positive start to the day the JSE closed flat on Thursday, weighed down by a poor showing from some miners.

A dovish US Federal Reserve message on Wednesday boosted sentiment towards risk-assets, with the rand firming 30c against the dollar overnight. This helped prompt a recovery in local retailer shares on Wednesday, as these stocks are interest rate-sensitive.

The Fed provided an additional fillip for equities, which have been boosted in January by early signals of caution, as well as signs of progress in the US-China trade talks. The $4-trillion MSCI world stocks index, which tracks 47 countries, was up 0.5% on Thursday, for the 20th day out of the past 23, Reuters reported.

For January, it is up more than 7.2%, which is its best January since the index began in 1988 and the best performance in any month since December 2015.

The all share closed 0.05% up at 54,156.8 points and the top 40 was flat. The resources index was down 1.25%, while food and drug retailers added 3.07%. General retailers were the worst performing index in January, falling 5.66%, amid a spate of disappointing trading updates.

Shoprite fell 13.94% in January, Mr Price 9.4% and Woolworths 8.82%.

Global sentiment was subdued a little by weak German retail sales data, although Asian markets were boosted by better-than-expected data from China, where factory and farm gate inflation rose from three-year lows in December.

Local data was positive. Farm and factory gate inflation, as measured by the annual change in the producer price index (PPI), decelerated to 5.2% in December from November’s 6.8%, beating market forecasts of 5.8%.

SA’s trade surplus in December came in at R17.2bn, beating market forecasts of R9bn. However, the data showed declines in imports and exports across all categories. The trade account will be influenced by the path of commodity prices, and the outlook for commodities has improved somewhat on the recent dovish nature of global monetary policy, said Investec economist Lara Hodes.

International focus is now likely to shift to US-China trade talks, which are expected to conclude in Washington on Thursday.

US non-farm payrolls data and, locally, the Absa purchasing managers index (PMI) for December are both due on Friday.

Shortly after the JSE closed, the Dow had fallen 0.55% to 24,876.43 points, while in Europe the FTSE 100 was up 0.32%. The CAC 40 had dropped 0.3% and the DAX 30 1%.

Gold was up 0.23% at $1,322.62/oz and platinum 0.7% at $823.49. Brent crude had gained 0.62% to $62.14 a barrel.

Rand hedge Richemont was 3.86% lower at R90.81. Sasol fell 3.51% to R400.42.