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Johannesburg - The JSE was sharply lower on Monday in line with global markets which are still jittery over President Donald Trump’s economic direction, as his inauguration speech on Friday did little to put investors' minds at ease over his protectionist policies.
By mid-morning the JSE's All-share index was again below the significant 50 000 point level, which means the market has given up most of its gains in the first three weeks of the year.
Global markets on Monday were overshadowed by the weak dollar, which slipped broadly after Trump’s protectionist tone in his inauguration speech, undermining optimism over the US economy spurred by his promises of tax cuts and other stimulus.
A weaker dollar is good news for commodity prices, as commodities priced in dollar become cheaper for buyers in other currencies, and this initially supported resources shares on the JSE
A weaker dollar however means a stronger rand, which traded at R13.54 to the dollar and put a cap on the prices of resources shares. By mid-morning the Resources index was 0.25% down after strong gains in early trade.
The local market was also pushed lower as the FTSE index in London, where most of the big dual-listed shares on the JSE are also listed, traded sharply lower due to the softer dollar in line with global markets elsewhere. The Industrial index, which includes most of these shares, was therefore already 1.29% down by mid-morning.
Financial shares also took a beating and lost 1.34% by mid-morning on Monday.
The All-share index was 1% lower at 49 978 points, while the Top 40 index was 1.04% weaker at 44 773 points.
After a sharp rally following Trump's November election that propelled it 3% higher for the month, the dollar gave up some of those gains against a backdrop of uncertainty surrounding the new president's policies, as well as his recent remarks about the impact of dollar strength.
Trump's first address as president on Friday highlighted his "America first" policies that were short on specific proposals and disappointed investors hoping for details on his plans to stoke growth, spend on infrastructure and reduce taxes. Trump pledged to end what he called an "American carnage" of rusted factories and vowed to put "America first", laying out two simple rules - buy American and hire American.
Japan's Nikkei index dropped 1.1%, while shares in Australia fell 0.8% after the Trump administration, on its first day in office, declared its intention to withdraw from the Trans-Pacific Partnership, a 12-nation trade pact Japan and Australia have also signed up for.
Trump also said on Sunday he plans talks soon with the leaders of Canada and Mexico to begin renegotiating the North American Free Trade Agreement."The market is getting nervous about the possibility that the world's trade might shrink," said Koichi Yoshikawa, executive director of financial markets at Standard Chartered Bank in Tokyo.The star on the local market was Hulamin [JSE:HLM], which makes aluminium products; it gained 12% in early trade to R12.00. The company said it expects its full-year headline earnings per share to double after a strong manufacturing performance delivered record sales volumes."[Hulamin] rolled products has benefited from consistent investment in operational excellence and risk management to achieve record sales volumes of 214 000 tonnes for the year under review," the company said in a statement.The company exports two-thirds of its products, mainly to the US, Europe and southern Africa. The rest is used in SA.The financial performance was achieved despite the stronger rand and relatively stable prices on the London Metal Exchange, it said.
