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Europe uncertainty sends JSE lower

Johannesburg – The JSE shipped more than 300 points on Wednesday, to go with 700 points it shed on Tuesday, in line with global markets amid continued concerns over Europe after credit rating agency Moody's said it may downgrade Portugal's sovereign debt, while violent protests hit the streets of Athens.

The local bourse did however, come off its earlier high.

The JSE all share index shed 1.14% with resources down 0.41%. Platinum miners lost 3.14%, but gold miners were up 0.21%. Banks dropped 2.57%, financials shipped 1.68% and industrials were 1.6% softer.

The rand was bid at R7.61 to the dollar from R7.56 at the JSE's close on Tuesday. Gold was quoted at $1 172.29/oz a troy ounce from $1 173.78/oz at the JSE's last close. Platinum was at $1 650/oz from $1 687/oz at the JSE's last close.

A local equities trader said: "After a brief start in positive territory this morning, the local bourse began to plummet at around midday when news filtered through that Moody's may downgrade Portugal.

"We did come off our earlier highs at close, however there appears to be no end in sight regarding the situation in Greece, and now other parts of Europe. The market has been selective over its news," he said.

Dow Jones Newswires reported that US stocks tumbled at Wednesday's open, hit by heightened concerns over Europe as violence erupted in Greece and a possible downgrade loomed over Portugal's debt.

The Dow Jones Industrial Average slid 86 points, or 0.8%, to 10840, in early trading, extending Tuesday's 225-point drop. Meanwhile the Nasdaq Composite fell 1.3% and Standard & Poor's 500-stock index dropped 1%. Financials and consumer discretionary stocks led its declines.

Wednesday's early drop came after Moody's Investors Service placed Portugal's government bond rating under review for a possible downgrade based on the deterioration of the country's public finances and its long-term economic challenges. Meanwhile in Greece, a nationwide strike spiralled into violence. Three people were killed after a fire broke out in riots near an Athens bank.

The worries sent the euro crashing to new one-year low as the dollar soared. The US Dollar Index, which represents the US currency against a basket of six others, was up 1.1%. As investors fled from riskier assets, crude-oil prices tumbled to below $80 a barrel. Gold futures also sank.

Investors said a potential downgrade to Portugal could impact portfolio managers obligated to pull out of assets downgraded by two of the three major credit rating agencies.

"Now it's musical chairs and do I want to be the one without a chair when this thing starts to go bad?" asked Bob Tull, chief operating officer at Old Mutual Global Index Trackers. "I don't think anyone wants to be in that position anymore."

Concerns over Europe overshadowed a slightly better-than-expected report on private sector employment from payroll giant Automatic Data Processing.

Private-sector employers added 32 000 jobs in April, according to ADP, more than the 20 000 expected by economists surveyed by Dow Jones Newswires.

On Friday, the government will release its key monthly jobs report for April. Economists expect the unemployment rate to stick at 9.7%, where it was in March. 

  - I-Net Bridge
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Rand - Dollar
18.97
-0.3%
Rand - Pound
23.95
-0.3%
Rand - Euro
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Rand - Aus dollar
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