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MARKET WRAP: JSE turns negative in late trade as Brexit continues to weigh

25 October 2019 - 19:26 By Andrew Linder
Finance minister Tito Mboweni. Picture: ESA ALEXANDER
Finance minister Tito Mboweni. Picture: ESA ALEXANDER

The JSE closed lower on Friday as investors sit on their hands ahead of a busy week of key events.

Brexit remains in focus for most international investors, with UK Prime Minister Boris Johnson having called for a general election on December 12.

Johnson has secured a deal with Brussels on the nitty gritty of Brexit, but the EU is still to decide on whether it will grant Britain an extension on the October 31 deadline. The general election also has yet to be approved by parliament.

International markets were mixed, with most a little higher on optimism that the US and China will soon finally reach a deal in an attempt to end their 15-month trade war, which has had a deleterious effect on the global economy.

“While global indices are grinding higher, safe-haven flows are still seeing decent demand for gold and treasuries,” said Oanda analyst Edward Moya.

Wednesday sees finance minister Tito Mboweni presenting his medium-term budget policy statement (MTBPS), which will outline the government’s budgetary plans for the next three years.

Analysts say Mboweni has a difficult task ahead of him as weakening GDP growth, coupled with increased government spending and a higher national debt burden, leave him little space for comfort.

Investec economist Kamilla Kaplan said the medium-term budget will provide the main domestic influence on the rand, which capped four weeks of gains on Friday, and is having its best month against the dollar since June. She said the speech will highlight “the implications for SA’s sovereign credit rating amid elevated government debt levels and financial pressure from Eskom”.

Friday sees ratings agency Moody’s Investors Service release a report on its latest review of SA’s sovereign credit rating. “It is widely expected that the medium-term budget will outline efforts towards fiscal consolidation and that a downgrade by Moody’s will be avoided. However, in view of the expected deterioration in fiscal metrics, it is possible that the stable outlook will be revised to negative,” Kaplan said.

The JSE all share fell 0.61% on Friday with the top 40 relinquishing 0.54%. Industrials led the losses, down 1.4%, while gold miners rose 1.38% and resources 0.47%.

AB InBev’s share price slumped nearly 10% to R1,210 after it warned of falling sales in South Korea and Brazil due to price increases in those countries. The fall wiped about R200bn off its market capitalisation, putting it on track for its worst monthly performance since listing in 2016.

Anglo American led gains among the larger diversified miners, up 1.02% to R376.18.

At 6pm, the rand had gained 0.69% to R14.5902/$ 0.89% to R16.1786/€ and 0.77% to R18.7361/£. The euro weakened 0.2% to $1.1082. The rand has now risen 3.63% against the dollar in October.

Gold was up 0.1% to $1,504.65/oz, with platinum adding 0.81% to $929.51. Brent crude tacked on 0.23% to $61.62 a barrel.

The Dow was up 0.76% to 27,010.24 points, while in Europe, the FTSE 100 was flat, France’s CAC 40 rose 0.67%, and Germany’s DAX 30 0.17%.