MARKET WRAP: JSE weakens despite some post-election support

13 May 2019 - 19:44 By Karl Gernetzky

The JSE gave up earlier gains to close lower on Monday, as China retaliated against the US with new import tariffs of its own.

The all share began the week higher, but news that China would raise tariffs on $60bn worth of US imports to 25% from 10% ultimately wiped out positive local sentiment on Monday.

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Banks and retailers began the day on a strong note, and despite losses by the close, still avoided the worst of it.

The rand was 0.97% weaker at R14.3033 to the dollar as the JSE closed. The local currency, however, has firmed 0.9% since last Wednesday, which handed the ANC a majority that has placated the market.

Analysts say the peaceful election has now created an expectation that promised pro-growth reforms will be implemented by the governing party. Geopolitical risks, including the US-China trade war, are still expected to serve as headwinds for the local currency.

With the uncertainty around the election outcome having now dissipated, foreign investors and lenders may now be a little more comfortable with their exposure to the rand, said wealth manager at PSG Wealth Ricus Reeders.

Although the market reacting positively to perceived political stability and an expectation of improving consumer sentiment, overall the election was likely to be market-neutral, said Warwick Bam, head of research at Avior Capital Markets.

A prolonged improvement for equities will only occur once there is evidence of more ethical governance within the state, as well as the implementation of pro-business policies.

The all share fell 0.72% to 56,373.7. Platinum miners lost 2.21%, banks 0.37% and food and drug retailers 0.13%. Gold miners added 0.31%.

The local bourse was faring better than some of its global counterparts. Shortly after the JSE closed the Dow had slumped 2.08% to 25,401.63 points, while in Europe, the FTSE 100 had lost 0.46%, the CAC 40 1.15% and the DAX 30 1.23%.

Gold was up 0.92% to $1,297.56 an ounce while platinum had lost 0.95% to $854.87. Brent crude was 0.57% higher at $71.16 a barrel.

Global focus was squarely on the escalation in the US-China trade war, as Beijing announced on Monday it would raise tariffs on $60bn worth of US goods, which could lead to further measures by the US.

Some focus is also on Turkey, where reports have suggested the government is moving to siphon off about $6.6bn of  its central-bank reserves. Citing multiple sources, Reuters reported that Turkey’s government budget deficit is much deeper than expected.

Looking ahead, there is some economic data to give markets direction this week, including SA’s retail sales numbers for March on Wednesday. US retail sales data for April is due on the same day.

Corporate news on Monday was mostly positive.

Vodacom rose 3.28% to R114.97 . The mobile operator said group service revenue rose 5% in the year to end-March from the prior comparative period.

Astral Foods gained 2.39% to R191.62, despite earlier reporting a decline in headline earnings for the six-month period to end-March of 52%.

Netcare fell 3.27% to R22.48. It said earlier that after-tax profit decreased 7.9% to R1.115bn in the six months to end-March, from R1.211bn in the previous year.

Naspers slipped 2.05% to R3,355.