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Johannesburg - Share prices on the JSE were lower on Monday morning as the market adopted a wait-and-see attitude ahead of central bank meetings in the United States and Japan this week.
Investors are waiting to see if the Federal Reserve will change its outlook for the US economy to reflect more benign economic conditions, leaving the path open for future interest rate hikes. Meanwhile, the Bank of Japan is contemplating applying negative rates to its lending programme for financial institutions.
The outcome of these meetings could have an impact on the strength of the dollar as well as emerging market currencies, including the rand. A stronger dollar, which earlier on Monday traded at the highest level against the yen since April 1, normally has a detrimental effect on the commodity sector.
The gold and resources sectors were therefore the biggest losers by mid-morning on Monday, with the Gold and Resources indices both 3.04% lower at that stage. Anglo American [JSE:AGL] traded 4.73% softer at R143.49 and BHP Billiton [JSE:BIL] lost 4.19% to R195.75.
The rand, which tried twice over the past few days to break through the level of R14.20 to the dollar, also retreated on Monday and at mid-morning traded at R14.48 to the dollar.
At that stage the All-share index was only 0.58% softer at 52 621 points while the Top 40-index had slipped 0.55% to 46 249 points. These indices have now lost all the gains made last week. The Financial index was also 0.63% down but the Industrial index, loaded with big rand hedge shares, gained 0.26% on the back of a weaker rand. With a public holiday on Wednesday, trading volumes are expected to be low this week.
Earlier in the day Asian shares were lower following a patchy performance by Wall Street on Friday, while the major European markets were also heading south.
Analysts on Monday morning said Asian markets have had a strong run over the past few weeks and are now at the point where indices will break out or move sideways in anticipation of further catalysts.
Investors took profits on Monday after markets soared on Friday, following a report that the Bank of Japan is considering applying negative rates to its lending programme for financial institutions at its meeting that begins on Wednesday.
The US Federal Reserve, which lifted its benchmark overnight interest rate in December for the first time in nearly a decade, meets on Tuesday and Wednesday. Its policymakers are expected to hold interest rates steady, but may change their economic outlook.
A Reuters poll showed on Friday that economists expect the Fed to deliver a rate hike in June, followed by another before the end of this year.
On Monday morning Naspers [JSE:NPN] was the busiest share on the JSE in terms of value and the stock dipped to below R2 000 a share for the first time since March 13 this year. The share price lost 6.4% over the previous seven days and is now flat over the past 30 days.
Among the other heavyweights in the industrial sector, SABMiller [JSE:SAB] traded 0.89% higher at R883.50, British American Tobacco [JSE:BTI] gained 1.85% to R95.80 and Richemont [JSE:CFR] was 1.57% stronger at R95.80.
Steinhoff [JSE:SHF] remains in the news after it improved its offer for Darty, a European retailer of electrical goods, on Friday for the third time since March to 160 pence per share in an effort to stave off a counter offer by the French retail group Fnac. This means Steinhoff is now prepared to pay £860m for Darty, compared to £673m in March this year.
Steinhoff shares, which reached a 52-week high of R96.85 on March 30, traded at R85.31 on Monday morning, 0.19% higher than Friday. The share price lost 5.9% of its value over the past seven days.
Rex Trueform’s [JSE:RTO] share price soared 17.39% to R13.50 on Monday morning after an announcement at the weekend that a consortium of investors has made an offer for all the shares in the clothing group. This offer is a compulsory one after the consortium increased its interest in the group to more than 35% after it acquired Brimstone’s interest in Rex Trueform.
Monday morning’s price of R13.50 is not only a new 52-week high, but also tops the offer of R12.14 a share.
