Johannesburg - The oil price was under pressure again on Thursday morning, pointing to sluggish economic conditions worldwide and leading to plummeting markets. The JSE was no exception, and all major indices were down by midday, except for the Gold index which benefited from the uncertainty.
Even the rand’s recent rally came to an end as concern over China’s economic problems pulled most emerging markets and their currencies lower.
Losses on the JSE were however moderate compared to some other markets. By midday the All-share-index was 1.11% down at 47 877 points, while the Top 40 index fell 1.17% to 42 915 points.
The rand lost 0.40% to trade at R16.63 to the dollar and that had an immediate effect on financial shares, with the Financial index trading 1.84% softer. The index lost 0.84% and resources shares were trading 1.39% down. Gold shares were more than 3% higher.
The rout on world markets started on Wednesday night, with US stocks plunging as a key oil stockpiles report and the Federal Reserve's Beige Book pointed to more sluggish US economic growth.
The Dow Jones and S&P indices lost more than 2% while the Nasdaq index shed 3.4%. Asian markets were also sharply lower, with the major European markets trading more than 2% softer.
A bearish US crude and fuel stockpiles report took the wind out of a rebound in oil prices and that spilled over into equities again, said Michael James at Wedbush Securities.
"Oil is a key determinant of economic strength and as long as we continue to have imbalances in supply and demand, until demand starts to pick up, you're not going to have an increase in the price of oil," he said.
"A majority of traders are using the lack of increased demand for oil as a read-through for global growth in general," he said. By midday the price of Brent crude was 0.47% lower at only $30.17, threatening the important psychological level of $30 a barrel. Sasol’s [JSE:SOL] share price was hammered by the weak oil price and the stock fell 3.93% to R380.40.
Emerging market currencies were also pulled lower by the yuan, despite efforts by the Chinese authorities to support their currency. The reference rate for the Chinese currency was set higher for the fourth consecutive day, but the unit softened despite support from state-backed Chinese funds. Analysts said there are still worries about the Chinese economy, although there are signs that the worst might be over for the world’s second biggest economy.
By midday most of the bigger financial shares were lower. Standard Bank [JSE:SBK] remained above R100.00 per share and traded 1.34% lower at R101.00, and Barclays Africa Group [JSE:BGA] lost 1.07% to R130.43. FirstRand [JSE:FSR] bucked the trend and gained 0.32% in morning trade to R41.25.
Among the insurance shares, Old Mutual [JSE:OML] was 3.19% lower at R37.38 and Sanlam [JSE:SLM] lost 1.34% to R55.15.
In the industrial sector Naspers [JSE:NPN] lost 2.21% to R1 849.66 and Richemont [JSE:CFR] was 1.33% softer at R105.30. British American Tobacco’s [JSE:BTI] record-breaking run of the past few days came to an end and the share price fell 0.78% to R872.18.
MTN’s [JSE:MTN] share price reached another 52-week low despite the news that the group has won an early victory in its legal battle with Nigerian authorities, securing the right to transfer money out of the West African nation after the federal government sought to freeze its accounts.
This Day newspaper reported that Justice Idris Mohammed of the federal high court in Lagos on Tuesday turned down a government request that MTN’s accounts be frozen, pending the outcome of a legal battle over the Nigerian Communications Commission’s record-breaking R64.5bn fine against the telecommunications group.
READ: Nigeria loses court bid to freeze MTN’s accounts
At midday the share price was 2.47% softer at R123.00, just below the previous low of R123.33. The share lost almost 30% of its value over the past three months.
The market responded positively to the announcement by Woolworths Holdings [JSE:WHL] that its first-half earnings probably climbed as much as 35%, as sales increased in clothes and food. By midday the share price was 1.48% stronger at R94.88.