MARKET WRAP: JSE closes lower as ECB rate decision weighs on European stocks

25 July 2019 - 19:19 By Odwa Mjo

The JSE closed lower on Thursday, tracking European stocks after the European Central Bank (ECB) opted to keep its interest rates unchanged.

Despite the decision, the ECB signaled that it may loosen monetary policy at future meetings, saying rates will remain at their “present or lower levels” at least throughout the first half of 2020. The ECB’s dovish commentary comes a week before the US Federal Reserve is expected to cut rates by at least 25 basis points.

Soon after the JSE closed, the Dow had fallen 0.31% to 27,186.45 points. In Europe, France’s CAC 40 was down 0.46% and Germany’s DAX 30 1.11%, while the FTSE 100 was flat.

Earlier, the Shanghai Composite gained 0.48%, Hong Kong’s Hang Seng 0.25%, and Japan’s Nikkei 225 0.22%.

Locally, credit ratings agency Moody’s Investors Service said in a statement on Thursday that Eskom’s R59bn bailout under the Special Appropriation Bill is credit-negative for SA as it will add strain to the country’s fiscal resources.

Producer inflation for June increased 5.8% year-on-year from 6.4% in May, in line with expectations, according to a Trading Economics consensus.

Shortly after the JSE closed, the rand had weakened 1.28% to R14.0623/$, 1.42% to R15.6878/€, and 1.29% to R17.5594/£. The euro had strengthened 0.15% to $1.1156.

The benchmark government 10-year bond was weaker, with its yield rising 10 basis points, or 0.1 percentage points, to 8.18%. Bonds yields move inversely to bond prices.

Gold had fallen 0.51% to $1,417.93/oz and platinum 0.66% to $871.19. Brent crude added 1.27% to $63.86 a barrel.

The JSE all share fell 0.1% to 57,662.90 points and the top 40 0.12%. Banks and financials fell 1.56% and 0.95%, respectively. 

Spur rose 0.46% to R22 after the company said on Thursday that its franchise restaurant sales in SA grew 6.2% and total sales rose 7.2% to R7.6bn for the year ended June.

Anglo American gained 1.03% to R381.78. The diversified miner said on Thursday that it plans on returning $1bn to shareholders through a share buyback programme.

Alexander Forbes gained 1.08% to R5.64 after the financial services company earlier announced the sale of its short-term insurance business to Momentum Metropolitan Holdings.

AB InBev jumped 6.07% to R1,416.07 — reaching its best level in 10 months during intra-day trade — after the global brewer said earlier that its interim revenue grew by 6%, with revenue per hectolitre up 4.2%.

Vodacom fell 1.58% to R113.53 despite saying on Thursday that group revenue in the quarter to end-June rose 4.2% to R21.5bn and service revenue 3.9% to R1.4bn.

Sasol slumped 6.37% to R308 after the company said earlier that it had written down the value of its assets in North America and Africa by R18.1bn.

Harmony gained 2.37% to R35.38 after it said on Thursday that gold production increased 17% year-on-year to 1.44-million ounces for the period ended June.

The US is scheduled to release GDP figures for the second quarter of 2019 on Friday, vital data for investors amid heightened rate-cut expectations.