MARKET WRAP: Rand could be headed for second week of gains

The rand had its best day in 10 on Thursday as global markets quietened a bit, with the trade-war narrative lowering somewhat in volume. Another day of gains on Friday could see it capping a good fortnight.

At 6pm the rand had gained 0.69% to R14.8176/$, 0.67% to R16.2955/€, and 0.61% to R19.0498/£. The euro was little changed at $1.1007.

Investec chief economist Annabel Bishop said that the US spread between 10-year and three-month treasury yields had lost the inversion that prevailed over most of 2019. This is being taken by the markets as potentially indicating that the risk of recession there is subsiding and that the US Federal Reserve is “less concerned on the growth front as well”.

Local bonds were also firmer, with the yield on the R2030 falling to 9.115%, from 9.145% at Wednesday’s close. Bond yields move inversely to their prices.

Bishop cautioned, however: “The rand’s hiatus will prove to be short-lived if the synchronised global economic slowdown accelerates or, indeed, persists.”

The JSE closed a little lower as global markets fell after US Fed chair Jerome Powell played down the chances of further interest-rate cuts. Testifying before Congress, Powell struck a dovish tone, though he did warn that US unemployment is rising.

His testimony pointed to US rates being kept on hold while the economy is growing, said Peregrine Treasury Solutions corporate treasury manager Bianca Botes in a note.

Expectations of a 25-basis-point cut from the Fed in November have fallen to about 6.7%, from 25% a month ago, according to Bloomberg data.

The rand would benefit from lower interest rates in the US, as it supports the carry-trade, in which investors borrow in low interest-rate environments to invest in higher yielding bonds, such as those of SA bonds.

The JSE all share fell 0.18% to 56,235.9 points and the top 40 0.21%. General retailers added 0.79% and gold miners 0.64%, while the platinum index relinquished 0.82% and resources 0.65%.

Gold was up 0.55% to $1,471.02/oz and platinum 0.92% to $882.44/oz. Brent crude was 0.16% higher at $62.72 a barrel.

Mediclinic was down 0.69% to R72. It said earlier that adjusted operating profit was flat at £137m (R2.6bn) in its six months to end-September.

Tradehold was unchanged at R11.70, after reporting revenue in its six months to end-August fell 1.8% to £47.7m (R907.25m).

Sephaku Holdings was unchanged at R1.25. The group reported a headline loss per share of 4.11c in its year to end-September, from headline earnings per share (HEPS) of 12.59c previously, largely due to an underperformance by Sephaku Cement, its joint venture with Dangote Cement.

Sappi’s share price hit a four-year low earlier on Thursday after the world’s largest manufacturer of dissolving wood pulp said low prices for its products had resulted in a decision to temporarily halt dividends. In an update for the quarter to end-September, the company’s fourth, Sappi said it would temporarily halt dividends until markets improve. It said profits declined by half compared to the same quarter in 2018.

Its shares recovered in later trade, however, to close 3.51% higher at R37.46.

Mr Price added 1.16% to R160.08 and TFG 2.03% to R159.58.

Glencore lost 0.99% to R46.04, BHP 0.71% to R319.88 and Anglo American 1.16% to R386.59.

- BusinessLIVE