Publications
Partners
Johannesburg - World markets were sharply lower on Tuesday as falling oil prices once again lowered investor appetite for riskier assets. The JSE followed and opened sharply lower.
The dollar on Tuesday fell to its weakest level against the yen since October 2014, as investors sought safe haven assets such as the Japanese currency and gold.
Commodity prices were also lower in line with the softer oil price, which drove the currencies of commodity producers such as South Africa and Australia down despite the weaker dollar.
READ: Oil and Asia burst post-ConCourt rand bubble
By mid-morning on Tuesday the rand fell back to R14.90 per dollar and major indices on the JSE were already more than 1.5% down, with financial and commodity shares the biggest losers. Earlier in the day Asian markets were also under pressure, and the major European markets were at that stage already substantially lower.
The oil price, which has fallen in recent days on fading prospects of agreement among producers to curb oversupply, took another hit from data showing US fuel demand fell in January for the first time in 14 months.
The oil price is still an important indicator of the state of the world economy, and any indication that the demand for oil will remain under pressure is automatically bad news for the prospects and prices of other commodities.
The US Energy Information Administration said on Monday that fuel demand dipped 0.6% in January. Total US oil demand fell 1% compared with January 2015.
Brent crude, the international benchmark, traded 30 cents lower at $37.39 a barrel, down from a 2016 high of $42.54 touched in mid-March.
New uncertainty about US interest rates was also bad news for stock markets. Two senior officials of the US Federal Reserve said the market's views of when the central bank would raise interest rates may be too pessimistic, just a week after Fed chair Janet Yellen said it would proceed cautiously in raising rates.
By mid-morning on Tuesday the All-share index traded 1.52% lower at 51 105 points, while the Top 40 index was at that stage already 1.63% down at 45 026 points.
This means the local market has given up most of the gains of the past month over the last few days, and the All-share index is almost at the same level as at the beginning of the year. At mid-morning the All-share index at 51 105 points was less than 3% higher than the 49 599 points recorded on January 4 this year.
The Resources index was again the biggest loser and gave up 3.54%, but it is still more than 8% higher for the year after a strong run in March. The Financial index lost a substantial 2.26% and is now only about 3% higher for the year. The Industrial index was 0.93% lower at 69 904 points, compared with 70 112 points at the beginning of the year.
The only exception was the Gold index which traded 1.35% higher at 1 996 points, more than 80% higher than the level of 1 154 points reached on January 4. Gold is perceived as a safe haven and rose more than 1% to $1 232 per ounce, reversing losses of 1.4% chalked up in the last two days and trading at $1 228.40/oz.
The biggest resources shares, BHP Billiton [JSE:BIL] and Anglo American [JSE:AGL], were both more than 4% lower. BHP Billiton lost 4% to R156.39 and Anglo American traded 4.98% softer at R110.11.
Among the industrial shares SABMiller [JSE:SAB] and British American Tobacco (BAT) [JSE:BTI] bucked the trend and traded higher. SABMiller was 0.55% stronger at R96.55 and BAT gained 1.10% to R873.77. Naspers [JSE:NPN] lost 0.90% to R2 041.44 and Sasol [JSE:SOL] was 4.41% softer at R415.00 due the weaker oil price.
Barclays Africa [JSE:BGA] was the busiest among the banking shares and traded 2.53% lower at R141.23. Old Mutual [JSE:OML] lost 1.11% to R40.03.
