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Johannesburg - Global stocks were sharply down on Monday and the JSE was no exception, as investors await key central bank meetings this week as well as Britain's stay-or-go referendum on European Union membership.
The global rout started on Friday when a strong rally on Wall Street fizzled out, with Asian markets on Monday showing the sharpest drop in four months. European markets were also down in early trading.
Analysts said the inability of Wall Street and other markets to set new records is preparing the ground for further declines.
The major indices on the JSE were sharply lower from the outset, and at mid-morning on Monday the All-share index was already 0.99% down at 52 648 points while the Top 40 index was 1.03% weaker at 46 542 points.
All the other major indices had dropped at that stage, with the Industrial index losing 0.88%, the Financial index 0.95% and the Resources index 1.72%. Even the Gold index was 0.70% down, despite gold trading at the highest level in almost three weeks.
The US Federal Reserve, the Bank of England, the Swiss National Bank and the Bank of Japan will hold meetings this week. All are expected to keep monetary policy steady against a backdrop of caution heightened by the global impact of a possible British exit from the European Union.
Confidence was further sapped over recent days by a steady flow of economic data indicating the world economy is still underperforming, despite years of heavy stimulus delivered by central banks.
Latest data showed China's fixed-asset investment growth cooling to 9.6% in the period from January to May compared to the same period a year earlier, below market expectations.
Wall Street is currently setting the trend, with the Standard & Poor's index flirting with a new record last week, reaching the highest level in about 11 months before fizzling out on Thursday and Friday.
“Equities are having a difficult time finding a rationale to punch through to a new high,” said Peter Kenny, senior market strategist at Global Markets Advisory Group in Berkeley Heights, New Jersey.
This week brings the release of important US economic data, including retail sales and inflation.
“We need to see something consistently good or bad to move the markets in a direction,” said Peter Costa, president of Empire Executions. “Right now we haven’t got that.”
MTN [JSE:MTN] was again the busiest share on the JSE in terms of value and volume, as the share price gained 1.15% to R141.61 after Friday’s strong recovery. The stock ended the week more than 13% higher, at one stage trading 20% up on the previous day on news that the mobile group has agreed to pay a reduced fine of $1.7bn in a settlement with the Nigerian government.
MTN’s share price dropped more than 22% since the fine was announced. More than 3.5 million MTN shares were sold in early trade for more than R497.8m.
The fine will be paid by MTN Nigeria over three years, and is only about a third of the $5.2bn the West African country initially demanded from MTN for failing to deactivate more than five million unregistered SIM cards. Nigeria agreed to cut the fine after the mobile group threatened to pull out of the country. The settlement clears the way for MTN to list its local unit on the Nigerian Stock Exchange.
Among the big shares Naspers [JSE:NPN] lost 2.35% to trade at R2 200.01. The share is now 4.5% lower than the all-time high of R2 311.57 reached on May 30, when the market capitalisation exceeded R1trn. On Friday evening the market value stood at R986bn.
Sasol [JSE:SOL], which on Friday closed more than 10% lower over the past seven days on concerns of the cost of its new project in the United States and a warning of a sharp profit drop, recovered somewhat on Monday and at mid-morning was 0.30% higher at R421.89.
Aspen [JSE:APN], which gained more than 13% over the past seven days, traded 1.13% higher at R356.50. The company acquired the marketing rights to a portfolio of established anaesthetics for $770m from the US group AstraZeneca.
Insurers remained in the spotlight in the financial sector, with Old Mutual [JSE:OML] and Discovery [JSE:DSY] among the busiest shares. Old Mutual lost 1.82% and Discovery traded 0.72% softer at R118.87. In the banking sector Investec [JSE:INL] was 1.17% down at R98.33.
Alexander Forbes [JSE:AFH] gained 2.63% to R7.05 after the company announced that headline earnings per share for the first half of the financial year increased by 82%.
Woolworths [JSE:WHL] dropped to a new 52-week intraday low of R80.50 before recovering 0.34% at mid-morning to R81.49. The stock is 11.35% lower over the past 30 days.
Anglo American [JSE:AGL] lost 3.05% to R135.32, and BHP Billiton [JSE:BIL] was 2.47% weaker at R175.55.
