JSE slips on global economy concerns

Johannesburg - The JSE followed European markets lower on Tuesday, on indications that the global economy may not be as strong as previously thought.

European markets fell to their lowest levels in two weeks on poor company results, with banking shares the biggest losers for the second consecutive day. The European banking index is at its lowest level in three weeks, after stress tests on European banks showed the sector is not completely out of the woods yet.

As most of the biggest shares on the JSE also trade on European bourses, they were also down, pulling the major indices lower.

Of the top ten shares on the JSE, of which only FirstRand [JSE:FSR] and MTN [JSE:MTN] are not listed in Europe, nine lost ground on Tuesday, with British American Tobacco (BAT) [JSE:BTI] the only exception. These ten shares represent 60% of the market capitalisation of the JSE and have a massive influence on the indices.

The result was that all the major indices, except gold, were substantially lower. By mid-morning the All-share index was 1.10% softer at 52 493 points, while the Top 40 index lost 1.37% to 45 517 points.

The Industrial index, which includes most of the dual-listed shares, lost 1.51% and the Financial index was 1.71% softer after Monday’s run on the back of solid results by Nedbank [JSER:NED]. The Resources index was 0.08% higher and gold 2.14% up.

Wall Street suffered modest losses on Monday after more bad news on the US economy followed Friday’s disappointing growth figures. The Institute for Supply Management's index of national factory activity dropped to 52.6 in July from 53.2 in June, below market expectations of 53.0.

Asian markets were also lower although Japan’s government approved a fiscal package of ¥28trn to revive the flagging economy, with cash payouts to low-income earners and infrastructure spending. The news did not move markets much, as most of it has already been discounted.

Fears are surfacing that Britain is heading towards a recession after the Brexit vote after a series of poor economic data. It was announced on Tuesday that Britain's construction industry suffered its sharpest downturn in seven years last month, after news on Monday that British manufacturing shrank at its fastest pace in more than three years in July and business confidence tumbled.

At Tuesday’s level the JSE hardly made any progress over the past three months. At this morning’s level of 52 493 the All-share index is almost 1% lower than the 52 957 reached on May 1.

The Financial index gained 1.2% over that period, but the Resources index is 2.1% lower despite a strong run lately. The Industrial index, which represents most of the big shares, lost 1.1% since May 1.

Among the industrial shares in the top ten, Naspers [JSE:NPN] lost 2.23% to R2 121.28 and Richemont [JSE:CFR] was 1.42% down at R82.36, just above the 52-week low of R82.15 set last week. Steinhoff [JSE:SHF] traded 1.10 softer at R87.09 and MTN lost 1.81% to R135.37. BAT, the second biggest share on the JSE, gained 0.74% to R887.49.

Anheuser-Busch InBev (AB InBev) [JSE:ANB], the biggest share on the JSE, and SABMiller [JSE:SAB], the third biggest, both lost ground. AB InBev shed 0.70% to R1 755.62 and SABMiller 1.11% to R802.50. The world’s two biggest brewers set out a timetable on Monday for the final stages of their $100bn-plus merger, with completion of the deal expected in a little more than two months, after the deal was approved by the Chinese authorities.

READ: AB InBev takeover of SAB date set

FirstRand, the only financial share in the top ten, traded 2.53% lower at R48.88. This drop was in line with the rest of the sector, with Standard Bank [JSE:SBK] losing 2.27% to R135.73 and Nedbank [JSE:NED] dropping 1.57% to R208.97 after Monday’s strong gain of more than 7%. Old Mutual [JSE:OML] was 1.19% down at R52.493.

BHP Billiton [JSE:BIL] and Glencore [JSE:GLN], the two resources companies in the top ten, were marginally lower. Glencore lost 0.20% to R34.45 and BHP Billiton 0.08% to R175.50. Anglo American [JSE:AGL], which is out of the top ten these days, traded 0.10% higher at R155.85.