Bernanke remarks spook markets

2012-03-01 14:05

Johannesburg - The JSE was ensconced in negative territory in midday trade on Thursday in tandem with international markets after cautious remarks overnight by US Federal Reserve chairperson Ben Bernanke on the world's biggest economy which have quelled investor appetite.

With a strong rand exerting further pressure on heavyweight rand-hedged stocks, resources and gold miners were leading the decline on the local bourse.

At noon local time, the JSE All Share [JSE:J203] index was off 0.48%, at 34 296 points. Gold miners were 2.71% weaker, resources gave up 1.54%, while platinum miners shed 0.99%.

Banks however managed to pick up 0.58%, with industrials flat at 0.07%, and financials 0.25% firmer.

The rand was at 7.45 to the US dollar, from 7.43 at the JSE's close on Wednesday. Gold was quoted at $1 719.44 a troy ounce from $1 776.25/oz at the JSE's previous close, while platinum was at $1 694/oz, from $1 727/oz.

"Our market is basically just tracking international markets, but a strong rand is also putting additional pressure on the bourse. So we're seeing heavyweight resource stocks and miners under some pressure," a local equities trader said.

Dow Jones newswires reports that Asian stock markets ended mostly lower on Thursday as Federal Reserve chairperson Ben Bernanke's cautious remarks on the US economy overshadowed an improvement in China's manufacturing activity.

Australia's S&P/ASX 200 Index dropped 1.0%, Hong Kong's Hang Seng Index fell 1.5%, Japan's Nikkei Stock Average shed 0.2%, and the Shanghai Composite slipped 0.1%.

South Korea's Kospi was closed for a holiday.

Regional investors took some encouragement from China's official manufacturing purchasing managers' index for February, which rose to 51.0 from 50.5 in January.

Still, sentiment remained cautious in Asia after US stocks faltered on Wednesday as Bernanke dashed hopes of additional quantitative easing and expressed a cautious view on the domestic recovery.

"Investors remain reluctant to hold positions without confirmation the US central bank will print their way out of any deterioration in the economic situation," said Sydney-based Ben Taylor, sales trader at CMC Markets, in a note.

"While the economic picture in the US is getting better the market is reliant on the knowledge that stimulus is still available if the situation were to worsen," Taylor said.

Surprisingly, European stock markets pushed a little higher on  Thursday, supported by strong corporate earnings from some of the region's leading blue-chip companies, which helped to overshadow softness in eurozone and UK manufacturing data.

At 09:33 GMT, the benchmark Stoxx Europe 600 index was up 0.4% at 265.26. London's FTSE 100 index was 0.5% higher at 5902.74, Paris' CAC 40 index rose 0.2% to 3459.49 and Frankfurt's DAX was up 0.4% at 6885.83.

It was corporate news that helped markets to climb higher. Deal news was the highlight, with shares of Cable & Wireless Worldwide soaring 18% on reports that India's Tata Communications may make a bid for the U.K. group.

Elsewhere, shares in Swiss-listed staffing company Adecco rose 4.2% after it said full-year sales rose 10% last year and net profit increased by around 22.7%.

UK-listed hedge fund Man Group shares rose 8.8% after it said funds under management had increased slightly in the first two months of 2012, and had seen an improvement in investor sentiment since the end of last year.