Steep drop on JSE in line with global markets

Johannesburg - Share prices on the JSE were sharply lower on Monday morning as global markets picked up where they left off on Friday, when last week's rally inspired by the Federal Reserve ran out of steam.

International markets took a breather on Friday after a burst of enthusiasm on the back of the US central bank's decision to keep interest rates on hold for a little longer, and the downward trajectory continued worldwide on Monday.

With European markets also sharply lower on Monday the big rand hedge shares on the JSE, which represent about half of the market's value, traded substantially lower. Local financial shares also followed the European markets, where financial shares were among the big losers.

The result was that the All-share index at mid-morning was already 1.44% lower at 51 249 points, while the Top 40 index shed 1.53% to 44 744 points. The Industrial index, which includes most of the dual-listed shares, was 1.51% softer and the Financial index lost 1.57%. Resources shares were also in the red, with the Resources index 1.49% down while the Gold index gave up 2.30%.

Investors' attention has turned away from the Fed’s monetary policies to other issues, including American politics ahead of the first US presidential debate later on Monday.

Half of America's voters will likely rely on the presidential debates to help them make their choice between Republican Donald Trump and Democrat Hillary Clinton in the November 8 election, according to a Reuters/Ipsos poll released on Monday.

"A good performance from Trump could see market volatility increase, particularly if investors think there is a possibility that he could actually win," wrote Michael Hewson, chief market analyst at CMC Markets in London.

The markets initially did not consider the possibility that Clinton could lose the election, but Trump’s better-than-expected showing has increased uncertainty about the possibility of a Trump presidency.

Shares prices on Wall Street dropped sharply on Friday, which set the tone for global markets on Monday.

The market’s attention will also be on this week’s oil producers' meeting in Algiers, where an attempt will be made to cap supplies.

Oil prices rose sharply last week on optimism about a possible deal, but dropped back more than 3% on Friday when it seemed that pre-forum talks last week between Saudi Arabia and Iran did not go well.

The JSE is heavily influenced by European markets, particularly the FTSE index in London, which was substantially lower with financial and energy shares the big losers.

A survey indicated that optimism about the outlook for Britain's financial services sector is at its lowest point since the financial crisis. According to another survey, three-quarters of British company bosses are considering moving operations abroad following the vote to leave the European Union.

Old Mutual [JSE:OML], which is also listed in London, traded 2.27% lower at R34.90. Among the banks, Standard Bank [JSE:SBK] lost 2.04% to R141.50 and FirstRand [JSE:FSR] shed 2.17% to R47.74.

Naspers [JSE:NPN] was one of the big losers in the Industrial index, trading 2.26% softer at R2 297.00, substantially lower than the all-time high of R2 530.00 set on September 6. Naspers’ share price is heavily influenced by movements in the share price of Tencent, which is listed on the Hong Kong market, as it owns 34% of the internet giant which is the biggest company in China. Tencent traded 2.38% lower at HK$213 in line with the rest of the Hong Kong market.

SABMiller [JSE:SAB] lost 0.50% to R771.62, but before Monday’s trade the share price was more than 6% softer over the past seven days and more than 19% down over the past 30 days. Steinhoff [JSE:SHF] lost 1.46% to R77.56 and Richemont [JSE:CFR] was 0.31% weaker at R83.09.

Sasol [JSE:SOL] lost 1.80% to R365.14 and is still more than 19% lower than 90 days ago, as a result of disappointing results and concerns about the cost and financing of its new plant in Louisiana in the United States.

Anglo American [JSE:AGL] and BHP Billiton [JSE:BIL] were both lower, with Anglo losing 2.64% to R163.65 but BHP Billiton only 0.12% softer at R193.74. Both shares made substantial progress over the past 30 days, with BHP Billiton gaining 8.93% and Anglo 12.05% before Monday’s trade.