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JSE jittery ahead of Trump inauguration speech

Johannesburg - Investors on the JSE were as cautious as their global counterparts ahead of Donald Trump's inauguration as US president on Friday.

All major indices on the JSE were modestly lower by mid-morning amid trepidation over Trump's first speech as president.

Although some of the measures Trump proposed in his election campaign could boost the US economy, most of the attention on Friday’s speech will centre on his protectionist rhetoric, which could have a detrimental effect on global free trade.

By mid-morning the All-share index was 0.59% lower at 52 586 points, while the Top 40 index was 0.62% softer at 45 817 points.

The biggest losers were resources shares, which were already 1.03% down by mid-morning. After a strong opening on Thursday, with the big commodity conglomerates on 52-week highs in early trade, the sector lost ground later in the day and closed marginally lower for the second consecutive day.

The Industrial index slipped 0.44% in line with the London Stock Exchange, where the FTSE index also opened lower in line with cautious markets elsewhere. The Financial index lost 0.63% in early trade.

The rand traded almost 1% stronger at R13.53 to the dollar, as the greenback is also under pressure over concerns about Trump’s policies. That put a cap on JSE's dual-listed shares.

There was also good news, but it was overshadowed by nervousness ahead of Trump’s first speech as president.

China's fourth-quarter gross domestic product growth came in at 6.8% versus forecasts of 6.7%, but despite the better-than-expected growth concerns are growing about whether China can contain the financial risks from an explosive expansion in debt fuelled by years of government stimulus spending.

Pressure on exports if Trump fulfils his protectionist promises is also a risk for China in 2017. The country is the major buyer of South African commodities, and resources on the JSE are very sensitive to the well-being of the Chinese economy.

There are also concerns that Trump expansionist economic policies could lead to labour shortages, unsustainable wage hikes and too much rather than too little inflation, since the US economy is already performing close to its potential.

Higher inflation means higher interest rates and a stronger dollar, which could lead to an outflow of capital from emerging markets like South Africa back to the United States.

Commodity shares were among the biggest losers on Friday, with the commodity giants all lower from the intraday 52-week highs set early on Thursday. Anglo American [JSE:AGL] lost 1.98% to R21.70 and BHP Billiton [JSE:BIL] traded 1.24% down to R239.74. Glencore shed 1.24% to R52.53.

The biggest loser among the major commodity shares was South32 [JSE:S32], which was unbundled from BHP Billiton in the beginning of last year. Since reaching an all-time high in November last year, the share has lost more than 6% over the past 30 days. It shed 3.73% to R27.13 on Friday, but before the day’s trade was still 175% higher for the past year.

African Rainbow Minerals [JSE:ARI], the locally-listed holding company with interests in many commodities, reached an intraday 52-week high of R116.00 in early trade on Friday. The share then fell back in line with the rest of the market and at mid-morning was 0.57% softer at R144.00. A year ago the stock was as low as R40.38.

The big dual-listed shares in the Industrial index showed marginal movement, mostly lower. British American Tobacco [JSE:BTI] was the busiest share in terms of turnover and traded 0.30% softer at R789.64. Naspers [JSE:NPN] lost 0.39% to R2 166.52 and Anheuser-Busch InBev [JSE:ANH] lost 0.66% to R1 427.65. Richemont [JSE:CFR] was 0.11% higher at R103.17.

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