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JSE still on downward trend amid jitters over Gordhan saga

Johannesburg - The slightly firmer rand gave financial shares on the JSE a welcome breather on Wednesday, but the general trend was still downwards as investors await more clarity on the future direction of US interest rates.

The market is still also nervous about the current political spat between Finance Minister Pravin Gordhan and the Hawks, which could lead to the axing of Gordhan.

By mid-morning the All-share index was lower for the third consecutive day, trading 0.80% down at 53 022 points. The Top 40 index was 0.71% softer at 46 488 points.

At midday the rand was trading at R14.40 to the dollar, about 0.70% firmer than the previous few days, which helped financial shares higher. The Financial 15 index, which lost more than 3% over the previous seven days, at mid-morning was 0.68% higher. Analysts warned however that the rand could easily extend its nine-day losing streak.

There was little market reaction to Reserve Bank data showing growth in private sector credit demand slowed to 6.78% year-on-year in July from the revised 7.23% in June.

At mid-morning resources shares were already 2.67% down. Besides a stronger dollar on the back of an expected hike in US interest rates, investors were also nervous about a warning that iron ore prices face renewed pressure and may sink back below $50 per tonne before year-end, as rising supply offsets an improvement in Chinese demand. The Gold index, which lost more than 13% over the previous 30 days before Wednesday’s trade, shed 3.56%.

The stronger rand also dampened demand for rand hedge shares and the Industrial index, which includes all the big rand hedges, lost 0.58% by mid-morning.

International markets are still waiting for the latest US jobs data for an indication on when US interest rates will rise, as US Federal Reserve officials contradicted each other on when rates will be hiked. Friday's jobs report is expected to show employers added 180 000 jobs in August.

Stanley Fischer, vice-chair of the Fed, said in an interview on Tuesday that the job market is nearly at full strength and the pace of interest rate increases will depend on how well the economy is doing. But on Wednesday Charles Evans, president of the Fed in Chicago, made a case for keeping rates lower for longer, highlighting sluggish growth.

The US bond market is however discounting a rate hike before the year is out with 10-year US Treasury yields on course for their biggest monthly rise in over a year. Markets were pricing in a 24% chance of a rate increase next month, according to CME Group's FedWatch tool, and a more than a 50% chance of higher rates by the end of the year.

US consumer confidence rose to an 11-month high in August, with households more upbeat about the labour market, data showed overnight.

All four major banks in South Africa traded higher after sharp losses over the previous days. Before Wednesday, FirstRand [JSE:FSR] and Standard Bank [JSE:SBK] both were more than 9% lower over the previous seven days. By mid-morning FirstRand was 0.96% up at R45.42 and Standard Bank had gained 1.55% to R137.71.

Barclays Africa [JSE:BGA] was 1.30% stronger at R154.42 and Nedbank [JSE:NED] was 2.01% higher at R214.13. Old Mutual [JSE:OML], Nedbank’s holding company, was unchanged at R37.14.

Among the big dual-listed shares SABMiller [JSE:SAB], which gained almost 8% since the rand collapsed in reaction the Gordhan saga, was only 0.04% higher at R836.18. The stock was as low as R746 as recently as August 14.

Furniture retailer Steinhoff [JSE:SHF] reported an almost one-third rise in full-year operating profit on Wednesday, boosted by a strong showing at its European business, but the market did not respond positively. The share price was initially higher but shed 5.42% at R88.70 by midday.

Steinhoff, which is in middle of buying the United States’ Mattress Firm and Britain’s Poundland, said in a trading update that operating profit rose to €1.5bn ($1.7bn) in the year to end-June from €1.1bn a year earlier.

Iron ore producers traded lower in response to a report by Clarksons Platou Securities, which dubbed the raw material its least favourite commodity.

Jeremy Sussman, an analyst at Clarksons Platou in New York, said even as steel output is set to remain resilient this year, iron ore may sink into the high $40s. Benchmark spot prices compiled by Metal Bulletin are at $59.31 a dry tonne.

Kumba [JSE:KIO], which is already 2.7% lower over the previous seven days, lost 3.39% in morning trade to R131.50. The share price is however still more than 269% higher for the year to date.

Kumba’s holding company, Anglo American [JSE:AGL], lost 2.08% to R398.89 and BHP Billiton [JSE:BIL], which has huge iron ore interests in Australia, traded 3.55% down to R190.52.

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Rand - Dollar
18.88
+0.3%
Rand - Pound
23.86
+0.2%
Rand - Euro
20.39
+0.2%
Rand - Aus dollar
12.33
+0.1%
Rand - Yen
0.12
+0.2%
Platinum
908.05
0.0%
Palladium
1,014.94
0.0%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
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