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Johannesburg - Global markets were jittery ahead of the Federal Reserve meeting later on Tuesday to review US interest rates in the wake of Donald Trump's surprise election win.
Markets are pricing in a rate hike with 10-year bond yields in the US touching the highest level since September 2014.
A hike in interest rates would not only support the dollar, but could also lead to an outflow from emerging markets to higher yields in the US where the risks are perceived to be lower.
South Africa is also vulnerable to such an outflow as the deficit on the current account is currently 4.1% of GDP.
By midmorning the major indices did not move at all. The All-Share index was unchanged on 55 525 points, while the Top 40-index also traded unchanged at 43 892 points.
At that stage a stronger opening in London supported the Industrial index somewhat, which was 0.48% higher, but the Financial index moved very little and traded only 0.03% higher.
Resources shares, which were the top performers on Monday, fell back 1.02% due to some profit taking and a slightly lower oil price.
The US markets are pricing in a nearly 100% chance of a quarter percentage point increase to the Fed's target range of 0.25% to 0.50%. The result of this week’s meeting, which starts on Tuesday, is expected on Wednesday evening.
What matters most to investors is the Fed's statement and economic projections, which will be examined for any signs of reaction to Donald Trump's surprise victory in the November 8 US presidential election.
Markets are expecting Trump to boost the US economy with increased fiscal spending, which could lead to higher budget deficits and higher inflation. Such a possibility is already discounted in the bond market.
An outflow of capital should be bad news for the rand, but the currency is still remarkably strong at R13.57 to the dollar, which put a cap on the prices of the dual-listed shares on the JSE which earn most of their income abroad and earn less in rand if the currency is strong.
READ: INFOGRAPHIC: How resilient rand weathered 2016 shocks
Sasol [JSE:SOL], which closed more than 4% higher on Monday after the Organisation of the Petroleum Exporting Countries (Opec) and non-Opec countries agreed to cut production, was another 0.43% stronger at R401.04.
BHP Billiton [JSE:BIL] and Glencore [JSE:GLN], which both have interests in the oil industry and were at intraday 52-week highs on Monday, were however lower on profit taking.
BHP Billiton lost 1.64% to R239.27 and Glencore was 2.66% softer on R50.21. Anglo American [JSE:AGL] traded 1.71% softer on R208.67.
Naspers [JSE:NPN] traded 0.14% softer at R1 958.90, but Richemont [JSE:CFR] was only 0.03% stronger on R89.78.
The market did not respond much to the news that Tencent Pictures, the film unit of China’s biggest internet company, Tencent, is looking for acquisitions that can accelerate plans to make its own blockbusters instead of just buying them. The potential targets could be in Hollywood. Naspers owns 34.4% of Tencent.
Barloworld [JSE:BAW] and Bidvest [JSE:BVT] continued their record breaking runs and reached new 52-week highs. Barloworld, which gained 34.7% over the previous thirty days, was on Tuesday another 1.27% higher on R116.32.
Bidvest gained 2.46% to R179.00 after gaining 9.54% over the previous seven days.
Altron [JSE:AEL] was before today’s trade already 26.76% stronger over the previous seven days on the news that the group is getting new investors which will end the Venter family’s control over the group.
The share price increased another 5.45% to set another 52-week high of R9.29.
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