JSE loses ground as European markets reverse course

Johannesburg - The JSE was again lower on Tuesday morning after European markets reversed course mid-morning as weakness in banks, led by another drop to record lows for Deutsche Bank, once again weighed on markets.

The JSE often takes its lead from European markets as many of the big dual-listed shares are also listed in Europe. These shares, which normally move in the same direction as the European listings, represent about 50% of the JSE’s market capitalisation.

Markets were originally upbeat as investors awarded the first US presidential debate to Democrat candidate Hillary Clinton over Republican candidate Donald Trump. Investors regard Clinton as the safe candidate who will maintain the status quo in American policies, while they are very unsure what a Trump presidency might mean for US foreign policy, international trade deals or the domestic economy.

A CNN poll of viewers, which the broadcaster noted was likely skewed somewhat to Democrats, showed 62% thought Clinton won the debate with 27% supporting Trump.

Deutsche Bank led the turnaround on the European markets when it hit new record lows, falling nearly 3% following a 7.5% slump in its stock price on Monday.

As a result, the Financial index on the JSE at mid-morning was already 0.91% lower, while the Industrial index traded 0.56% down. The index, which includes most of the big dual-listed shares, has already lost 2.49% over the previous seven days.

The All-share index was at that stage 0.68% lower at 51 129 points, while the Top 40 index was 0.72% softer at 44 638 points.

The mood was further spoilt by the strong performance of the rand - which on Tuesday morning stood at R13.57 to the dollar - as this means the value of the dual-listed shares decreases in rand terms.

Hopes of a spike in the oil price, which would boost the resources sector, were dashed on Tuesday. Dealers were discounting the possibility that Opec oil producers could clinch an output-limiting deal in Algeria this week, but sources within the group said the differences between the kingdom and rival Iran remained too wide.

Sources told Reuters last week that Saudi Arabia had offered to reduce its output if Iran froze its oil production to below 4 million barrels a day, but Iran insisted on having the right to ramp that up to around 4.1-4.2 million barrels per day.

Resources shares were also lower and the Resources index shed 1.11%, with the Gold index 0.72% softer. Sasol [JSE:SOL], the biggest oil share on the JSE, lost 0.99% to R366.01 while BHP Billiton [JSE:BIL], which also has oil and gas interests, traded 1.29% softer at R190.78. Anglo American [JSE:AGL] lost 0.81% to R162.52.

The top banks on the JSE suffered moderate losses, with Standard Bank [JSE:SBK] trading 0.68% lower at R141.43 and FirstRand [JSE:FSR] losing 0.61% to R47.42. Barclays Africa [JSE:BGA] shed 0.34% to R151.48. Capitec [JSE:CPI], one of the busiest shares in the sector, went against the trend and traded 0.94% stronger at R610.00.

The losses were bigger in the insurance sector, with Sanlam [JSE:SLM] 2.35% softer at R76.80, Old Mutual [JSE:OML] losing 1.14% to R35.55 and Discovery [JSE:DSY] 1.36% down at R113.92.

The busiest shares in the industrial sector were all moderately lower. Naspers [JSE:NPN] lost 0.30% to R2 316.60 and SABMiller [JSE:SAB] was 0.32% weaker at R769.47. MTN [JSE:MTN] dropped 1.47% to R122.18. British American Tobacco [JSE:BTI] started the day higher, but by mid-morning was 0.09% lower at R862.21.