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But by mid-morning the initial losses were made up and most of the major indices were higher again, supported by a weaker rand.
Asian shares pulled back from a one-year high and the dollar strengthened on Wednesday, after New York Fed president William Dudley said US interest rates could rise as soon as September.
Higher interest rates in the US could lead to a reversal of some of the funds currently flowing from developed markets into emerging markets searching for better yields than the record low rates in most of the major economies.
The rand also weakened against a stronger dollar, as it did not succeed in breaching an important resistance level of R13.20 to the dollar. By mid-morning the unit was trading at R13.47 to the dollar, about 0.46% weaker than the previous day’s close.
READ: Rand loses steam on signs US Fed might hike rates
A weaker rand is good news for the big rand hedge shares on the JSE, helping them regain earlier losses.
By mid-morning the All-share index, which ended flat on Tuesday after a promising rally in the morning, was 0.23% higher at 52 515 points, although the index lost almost 1% in earlier trade. The Top 40 index gained 0.38% to 45 567 points.
The recovery was led by the Industrial index, which includes all the big rand hedge shares and gained 0.81% in morning trade. The Resources index was also 0.23% up, but the Financial index shed 0.91% with Standard Bank [JSE:SBK] losing 1.44% to R144.40 and FirstRand [JSE:FSR] 1.28% to R49.25.
Wall Street retreated from record highs on Tuesday after Dudley said that as the US labour market tightens and evidence of rising wages builds, "we're edging closer towards the point in time where it will be appropriate to raise interest rates further". The comments from Dudley, a permanent voter on policy and a close ally of Fed chair Janet Yellen, were seen as more hawkish than a cautious message last month.
Atlanta Federal Reserve Bank president Dennis Lockhart, seen as centrist, concurred, saying he does not rule out a September hike - something markets have almost completely priced out.
Data released on Tuesday lent some support to their views, with US industrial production and housing starts expanding in July although consumer prices were unchanged from June, following two straight monthly increases of 0.2%.
Naspers [JSE:NPN] was one of the strong performers on the JSE and gained 1.75% to R2 172.53. SABMiller [JSE:SAB] traded 1.72% higher at R768.12 and Anheuser-Busch InBev [JSE:ANB] 1.28% up to R1 704.50. British American Tobacco [JSE:BTI] also ended a recent losing streak and gained 0.54% to R862.06. Richemont [JSE:CFR] was the busiest share in terms of volume but traded 0.10% softer on R83.34.
Steinhoff [JSE:SHF] continued its strong rum of the past month and traded 1.20% firmer at R91.10. Before Wednesday’s trade the stock was already 8.5% higher over the past 30 days on the back of major acquisitions, including the British group Poundland and the Mattress Company in the United States, which will give Steinhoff access to the North American market.
BHP Billiton [JSE:BIL] traded 2.12% stronger at R186.15 and South 32 [JSE:S32], which was unbundled from BHP Billiton at the beginning of the year, reached a new 52-week high of R21.17 after it gained 1.53% in morning trade.
The resources sector was however a mixed bag as both Glencore [JSE:GLN] and Anglo American [JSE:AGL] traded lower. Glencore lost 1.49% to R33.63 and Anglo was 0.42% softer at R154.06.
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