MARKET WRAP: JSE drops as global markets ponder US-China trade war

The JSE was lower on Thursday with  global equities in negative territory as the US and China aggravate market fears that the prolonged trade war may drag on.

China’s commerce ministry said on Thursday that it will push to reach a partial trade deal with the US. This follows a report by Reuters on Wednesday that sources close to the White House say the partial trade deal might only be signed in 2020.

“Uncertainty prevails as we’re no closer to a deal than we were a month ago; at least that is my impression from the headline ‘Trade-deal delay looms’. The obvious questions are whether the US will level further tariffs on China in December if Washington and Beijing fail to compromise and whether China will take it on the chin or counter the punch,” said Rand Merchant Bank analyst Nema Ramkhelawan-Bhana.

Shortly after the JSE closed, the Dow was down 0.26% to 27,748.26 points. In Europe, the FTSE 100 had lost 0.46%, France’s CAC 40 0.21% and Germany’s DAX 0.1%.

Earlier, the Shanghai Composite fell 0.25%, Hong Kong’s Hang Seng 1.57% and Japan's Nikkei 225 0.48%.

The pro-democracy protests in Hong Kong, which have been going on for the past six months, continue to weigh on global market sentiment.

The rand was leading emerging-market currencies tracked by Bloomberg on Thursday evening. The currency strengthened to its best level in three weeks after the Reserve Bank kept the repo rate unchanged at 6.5% on Thursday, in line with market expectations.

“Regarding future risks, despite past ‘shocks’ which sapped the rand, recent evidence has shown that inflation has nevertheless still declined, indicating how weak the cost transmission mechanism has become in changed economic circumstances,” said Raymond Parsons, economics professor at the North West University Business School.

“There is also a danger that the credibility of the Reserve Bank’s anti-inflation mandate may be jeopardised if it is continually perceived not be responding positively to tangible improvements in the inflation outlook. The burden of proof for a central bank cannot be absolute certainty,” Parsons said.

At 6.20pm, the rand had firmed 0.62% to R14.6923/$, 0.62% to R16.2632/€, 0.66% to R18.969/£. The euro was flat at $1.1069.

The R2030 government bond was weaker with the yield rising one basis point to 9.075%. Bond yields move inversely to their prices. 

Gold was down 0.28% to $1,467.11/oz  and platinum 0.1% to $917.12. Brent crude added 1.41% to $63.34 a barrel.

The JSE all share fell 1.35% to 56,540.3 points and the top 40 1.44%. Banks and resources both fell 2.15%.

Hospitality Property said on Thursday that rental income decreased 3% to R335m in the six months to end-September. Its share price fell 1.3% R7.60.

Tsogo Sun Hotels dropped 1.69% to R3.50, after earlier reporting basic and diluted adjusted headline earnings per share fell 34% to 6.9c in the six months to end-September.

Investec Plc said on Thursday that its asset management generated net inflows of £3.2bn in the six months to end-September which lifted average assets under management and increased adjusted operating profit by 6.3%. Its share price fell 1.63% to R81.65.

Mr Price reported normalised headline earnings per share fell 7.9% to R4.55 in the 26 weeks to end-September. The retailer said a short-term improvement in the consumer environment was unlikely. Its share price, however, jumped 11.25% to R183.51, its best level since July 25.

- BusinessLIVE