MARKET WRAP: JSE has its worst month since October 2018

The JSE closed a little lower on Friday, tracking weak global markets, after the White House threatened to impose tariffs on Mexico in response to illegal migration from that country.

On Thursday, US President Donald Trump said he would impose a 5% tariff on Mexican goods as of June 10 2019. The US said in a statement that should Mexico not address illegal immigration, the tariffs will increase to 10% in July, 15% in August, 20% in September, and 25% in October.

This rattled global markets while the US-China trade war continues to weigh on sentiment, as investors worry about the long-term effect the conflict will have on the global economy.

PODCAST | Business Day Spotlight - Policy uncertainty, and a plummeting GDP cause economic upset 

For more episodes, click here. 

Subscribe: iono.fm | Spotify | Apple Podcasts | Pocket Casts | Player.fm

“An actual global trade war would likely drive SA’s economy into a recession more severe than the technical ones experienced at times in the current decade,” said Investec economist Annabel Bishop. “The global economy would also not likely recover quickly as increased protectionism hinders economic growth. A resultant weakening in SA’s growth would be likely, which would aid a credit-rating downgrade from Moody’s.”

Asian markets were lower on Friday: the Shanghai Composite fell 0.24%, Hong Kong’s Hang Seng 0.79%, and Japan’s Nikkei 1.63%. At the close of the JSE, the Dow was down 1.01% to 24,915,87 points, the  FTSE 100 had fallen 0.81%, France’s CAC 40 1.05%, and Germany’s DAX 30 1.51%.

The JSE all share was little changed at 55,650.4 points, while the top 40 fell 0.16%. Resources fell 1.45%, while gold and platinum miners gained 7.79% and 3.52% respectively. The all share’s 4.92% fall in May was its worst in seven months and came after five consecutive months of gains.

Mr Price jumped 11% to R197.15 after the retailer said its total revenue rose 5.8% to R22.6bn and dividends per share increased 6.2% to 736.2c  for the year ended March.

Tongaat Hulett slumped 7.73% to R16.70 after it said it needed to restate its financial statements for the year to end-March 2018 after identifying “past practices, which are of significant concern”, which the company said resulted in financial statements not reflecting its underlying business performance. 

Rebosis recovered 8.54% to 89c, but still ended May down 31.54%, as concerns about the property fund’s debt burden persisted.

The rand firmed 0.95% to R14.5837/$, after weakening to R14.85 earlier. It reached a seven-month low on Wednesday, at R14.89. The local currency gained 0.86% to R16.2453/€ and 0.98% to R18.3857/£. The euro was unchanged at $1,114.

The benchmark R186 government bond strengthened, with its yield falling one basis point to 8.465%. Bond prices move inversely to bond yields.

Gold rose 0.96% to $1,300.73/oz, while platinum fell 0.41% to $793.05. Brent crude slumped 5.06% to $63.10, putting it on track for its worst month since November, fueled by the prolonged US-China trade war and an increase in US production. 

SA reported a trade deficit of R3.43bn for April, data from Sars showed on Friday.

In the week ahead, GDP figures for the first quarter of 2019 will be released on Tuesday, with analysts expecting a contraction of 1.6%, according to a Bloomberg consensus. Business confidence for May, the Absa manufacturing purchasing manager’s index (PMI), and current-account data are also all due during the course of the week.

BusinessLIVE