Publications
Partners
Johannesburg - The JSE followed global markets lower on Friday as investors were waiting for third-quarter US gross domestic product figures due later in the day.
Expectations are the figures will surprise on the upside, after upbeat jobless claims, manufacturing and home sales data earlier this week. This strengthened the case for the Federal Reserve to raise US interest rates by year-end, and the dollar and bond yields soared higher to the detriment of share prices worldwide.
Sentiment on the JSE is also soured by disappointment that Finance Minister Pravin Gordhan's mini budget did not do enough to stave off a possible downgrade of South Africa’s credit rating later this year.
The financial sector was the biggest loser on Friday, with the Financial 15 index already 1.24% lower by mid-morning. This is because a downgrade will mean financial institutions would have to pay more for funding costs. Old Mutual [JSE:OML] briefly traded at a new 52-week low.
Higher US interest rates will also strengthen an already firm dollar even further to the detriment of the rand, which is also bad news for financial shares. The dollar is currently the highest in three months.
An increase in US interest rates could also lead to an outflow of investments from emerging markets like South Africa back to the US, where bond yields are rising sharply, as the US is seen as a less risky investment destination.
The All-share index was already 0.82% lower at 50 719 points by mid-morning, while the Top 40 index lost 0.82% to 44 225 points.
European markets followed Wall Street and Asian markets lower, which pulled the dual-listed shares in the Industrial index 0.84% lower.
Benchmark 10-year US and eurozone yields rose to their highest since May and 10-year British yields were firmly on track for their biggest monthly rise since January 2009, the second-biggest in over 20 years.
"Bond markets are facing a nightmare at the moment as we continue to see yields rise sharply," said John Reid, a market strategist at Deutsche Bank.
Analysts at Rabobank deemed the bond market sell-off a "bloodbath", although they questioned whether the economic fundamentals justified such a steep rise in yields.
The Fed, the Bank of Japan and the Bank of England all deliver their latest policy decisions next week. The Fed is 90% certain to hold its fire, according to future prices on the Chicago Mercantile Exchange, but the probability of a rise in December, after the US presidential election, is 72%.
The rand was remarkably stable on Friday, strengthening by 0.30% to R13.84 to the dollar, but that did not help the big rand hedge shares on the JSE.
The biggest loser among the dual-listed shares is Anheuser-Busch InBev [JSE:ANB] which traded 4.96% lower at R1 616.16 on Friday, after it lost more than 6% on the European markets on Thursday. This is a new 52-week low as the share lost more than 10% over the last three months.
The share price dropped sharply as the brewer missed profit estimates for the sixth straight quarter, illustrating clearly why the Budweiser maker needed to spend $103bn on buying SABMiller [JSE:SAB].
READ: AB InBev reports surprise earnings drop
The drop could jeopardise the company’s position as Europe’s biggest company by market value, a status it only gained this month when the takeover of SABMiller was completed after a year-long process. It is however still by far the biggest company on the JSE, with a market value of R2.87trn.
Naspers [JSE:NPN] lost 1.16% to R2 303.12 and MTN [JSE:MTN] was 1.59% lower at R113.26. Steinhoff shed 1.71% to R72.27. British American Tobacco [JSE:BTI] recovered for the second day and gained 0.71% to R783.18.
Telkom’s [JSE:TKG] share price was the victim of profit- taking on Friday and lost 1.57% to R61.39. The share jumped by almost 6% on Thursday after the telecommunications group said it expects normalised headline earnings per share (Heps) for the six months to September 3 2016 to increase by as much as 30%, compared to the same period a year ago.
It said headline EPS is likely to rise between 10% and 30% year-on-year, while basic EPS is expected to climb by between 0% and 20%.
The resources index lost 0.46%, but the three biggest resources companies were all marginally higher. Anglo American gained 0.45% to R185.64, BHP Billiton [JSE:BIL] was only 0.05% higher at R206.89 and Glencore [JSE:GLN] gained 0.15% to R41.01.
Old Mutual, the insurer which is also listed in London, dropped to a intraday 52-week low of R33.25 before it recovered somewhat. By mid-morning the share was 1.27% softer at R33.442, after losing more than 19% over the previous 90 days.
Standard Bank [JSE:SBK] lost 1.18% to R138.99 and FirstRand [JSE:FSR] was 0.78% softer at R45.76.
