Why the JSE closed lower last week Friday

By Sunburst Staff

Trading on the JSE started high last week and closed weaker on Friday. This was after trading lower for most of the week. This was as markets responded to decision of the Reserve Bank statement released on Thursday in which interest rates were kept unchanged.

According to the bank’s monetary policy committee (MPC), the deteriorating inflation outlook suggested that the unchanged stance cannot be maintained indefinitely. This sets the scene for likely interest rate hikes later in the year.

Looking at trading on Friday, one would say it was muted muted. Dominating trading patterns for the week was corporate earnings. For example, shares in Richemont went down as much as nearly 4% in early trade on Friday before subsequently recovering following its full-year results.

Global markets were mixed with the Dow Jones industrial average 0.07% down at the JSE’s close. The FTSE 100 gained 0.54% and the Paris CAC 40 was flat (0.02%).

At 5pm the all share was 0.13% lower at 54‚055.40 with the blue-chip top 40 shedding 0.06%. Gold lost 0.57% and industrials were down 0.19%. Financials were flat and resources lost 0.02%. Platinum lifted 0.48% and banks gained 0.14%.

Looking closely at the tone from the reserve bank- it is time for us to brace ourselves for rate hikes in the coming months. Higher interest rates usually have an adverse effect on equity markets.

The outlook for the global economy was broadly unchanged since the March MPC meeting‚ with US growth softer and that of the eurozone better than expected. The local growth outlook has been cut slightly.

“A major cause for alarm is the continued impact on capital flows and the rand when the US Federal Reserve starts hiking rates.”

Mr Odendaal from the Reserve Bank aid the local bank was leaning towards being more hawkish in that the view had been taken that US rate hikes were not yet fully priced into markets.

The weaker rand has had a remarkably limited impact on headline inflation‚ but the MPC seems to be assuming that it is not permanent. “Hence local rate hikes can be expected on the back of higher local inflation‚” he said.

Global luxury goods group Richemont closed 1.43% lower at R108.43. It earlier reported full-year net profit was down 35%.

Among global mining stocks South32 shed 1.61% to R21.40. Sasol dropped 1.14% to R446.60.

African Rainbow Minerals closed 3.21% lower at R97.69. Among gold stocks Gold Fields lost 1.22% to R41.14.

Lonmin gained 1.69% to R25.81 among platinum stocks.

Investec was the star performer among banks, gaining 1.85% to a record high R119 after reporting strong annual results on Thursday.

Retailers were mixed with Mr Price gaining 0.91% to R247.25. Pick n Pay lost 1.21% to R55.52.

Among property stocks Investec Property Fund was up 1.17% to R17.30 and Resilient gained 1.57% to R97.17.

Brait closed 1.33% weaker at R111.50 after rising strongly in the week on the London New Look takeover.

Coronation Fund Managers was 1.15% lower at R90 after reporting disappointing interim results earlier in the week.

Wall Street traded marginally lower as CPI data caused concerns for the timing of rate hike. The Dow traded in the red by -0.06%, while the S&P 500 traded -0.07% lower, and Nasdaq traded +0.17% up. Asian markets closed at record highs with Toyota and banks leading the way. The Nikkei closed +0.30% higher, while the Hang Seng closed higher by +1.70%. European indices traded higher on a weak Euro in spite of weak sales data for luxury goods Richemont. The DAX traded lower by -0.28%, while the CAC 40 was higher by +0.02% and the FTSE 100 traded +0.57% higher. At local close Oil(Brent) traded lower by -1.56% at $65.50 while Gold traded lower by -0.07% at $1203.20. The dollar traded 0.72% stronger against the EURO at EUR/USD $1.1032. On the local front the All Share index closed lower by -0.13% and the rand traded 0.37% weaker against the dollar at R/USD 11.8682.

 

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