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JSE drops as market mood turns sombre

Johannesburg - Share prices on the JSE drifted lower on Wednesday morning, despite rampant world markets and a buoyant mood about the state of the global economy.

The JSE started 2017 trade on a high note on Tuesday following world markets, but share prices drifted sideways later on and gains were quite modest when the market closed.

The negative attitude continued on Wednesday, with the local market in desperate need of good news to give share prices a boost.

By mid-morning most of the major indices were modestly lower, with the All-share index already losing 0.99% to 50 518 points. The Top 40 index at that stage was 1.17% lower at 43 743 points.

The Industrial index was already 1.40% down, the Financial index shed 1.26% and the resources index traded 0.35% lower after a reasonable performance on Tuesday.

The relatively strong rand, which traded only slightly lower on Wednesday at R13.78 to the dollar, continued to put a damper on the prices of the dual-listed shares which earn most of their income in foreign currency and earn less if the rand is strong. These shares are also more expensive in rand if the currency is strong.

The local market is facing the threat of foreign investors leaving emerging markets as stronger economic prospects in the developed world, particularly the United States, increase the possibility of higher interest rates which will encourage investors to divert their money to those markets.

The brightening mood on international markets followed a round of upbeat factory surveys from China, the eurozone and United States. Analysts at Barclays said their measure of global manufacturing confidence hit its highest since December 2013.

US factory activity sped to a two-year high amid a surge in new orders, while manufacturing in the eurozone grew at its fastest pace in five years.

Data in the US also showed a sharp pick-up in raw material prices, which stoked speculation that stimulus measures proposed by president-elect Donald Trump could generate more inflation. US bond yields are already discounting such a possibility.

The result was that the Dow Jones index on Wall Street was heading towards 20 000 points on Tuesday, with London's FTSE index on an all-time high. On Wednesday the Nikkei index rose to a 13-month high, after the latest data on the Japanese manufacturing sector - in line with the rest of the world - showed factory activity had expanded at the fastest pace in a year.

Strong factory growth should be good news for commodities demand, but the rampant dollar is putting a lid on commodity prices.

The US dollar crept nearer to 14-year peaks on Wednesday, supported by an abundance of upbeat global economic data.

Local shares which staged a rally over the past few days were fell victim to profit-taking on Wednesday.

Among the top shares Naspers [JSE:NPN] lost 1.33% to R2 007.61, and MTN [JSE:MTN] traded 1.23% softer at R128.40. Bidvest [JSE:BVT], which last month traded at a 52-week high of R183.09, at mid-morning was 2.69% lower at R175.13. Richemont [JSE:CFR] lost 1.06% to R89.06.

Nedbank [JSE:NED] and RMB Holdings [JSE:RMH] were on new 52-week highs in early trade, but then lost momentum with both substantially lower by mid-morning. Nedbank lost 2.86% to R234.35 after the share reached a high of R241.50.

RMB Holdings [JSE:RMH] traded 2.31% lower after trading as high as R67.50. Sanlam [JSE:SLM] was one of the busiest shares in the sector, trading 1.03% softer at R63.16.

BHP Billiton [JSE:BIL] in the resources sector was marginally higher, gaining only 0.27% to R224.41, but Anglo American [JSE:AGL] traded 0.22% softer at R197.06.

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Rand - Dollar
18.92
+0.1%
Rand - Pound
23.88
+0.1%
Rand - Euro
20.39
+0.2%
Rand - Aus dollar
12.32
+0.1%
Rand - Yen
0.13
+0.0%
Platinum
908.05
+1.2%
Palladium
1,014.94
+1.3%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
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