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Johannesburg - Share prices on the JSE took a breather on Tuesday as European markets became jittery on fears that Britain is heading for a "hard" Brexit, which pushed the pound to some of the lowest levels against the US dollar seen in more than three decades.
All major indices on the JSE were lower by mid-morning on Tuesday, including the Resources and Industrial indices, normally supported by the big dual-listed shares which have followed London's record-breaking FTSE index higher.
The FTSE’s record-breaking run, which lasted for 15 consecutive sessions, was broken on Tuesday morning and the index traded lower from the outset.
European markets, and the British market in particular, have been waiting for a speech by British Prime Minister Theresa May in which she will set out her 12 priorities for upcoming divorce talks with the European Union. According to a statement by her office, she will not seek a Brexit deal that leaves Britain "half in, half out" of the European Union.
This means Britain will have no special market access to the EU which makes investors nervous, although the weak pound supports London-listed companies which earn their income abroad in foreign currencies, which are then converted into more pounds.
By mid-morning the All-share index on the JSE was 0.46% lower at 52 913 points, while the Top 40 index - which includes all the big capitalisation shares - had lost 0.49% to 46 105 points. The Industrial index shed 0.44% while resources were 1.05% lower, pushed down even further by a drop in metal prices. The Financial index was the most stable, trading only 0.04% softer.
Local investors also utilised the opportunity to take some profits as the market made a brisk start to the new year, after last year’s dismal performance. The All-share index at Monday’s closing level of 53 159 points was already 4.7% higher for the year, almost twice as much as the growth rate for the whole of last year. The index gained 3.7% for the past seven days.
Among the big capitalisation shares, Naspers [JSER:NPN] traded 0.36% softer at R2 168.27 and Richemont [JSE:CFR] lost 0.82% to R103.05. British American Tobacco [JSE: BTI] slipped 0.20% to R780.72.
The losses in the resources sector were more substantial, and the big names in the sector were also lower. BHP Billiton [JSE:BIL] was the biggest loser, trading 2.48% softer at R236.87, and Anglo American [JSE:AGL] was 1.92% down at R218.72. Glencore [JSE:GLN] was 1.79% weaker at R52.06.
Sanlam [JSE:SLM] was the busiest share in the financial sector, trading 1.66% higher at R65.68. Sanlam was the major shareholder of Bankorp, now Absa, which received a controversial bail-out in the apartheid era which is now being reinvestigated. Investors however did not seem too perturbed about possible consequences. The dual-listed Old Mutual [JSE:OML] lost 0.66% to R34.57.
The strong interest in retail shares continued, with Woolworths, Shoprite, Mr Price and Truworths again among the busiest shares on the JSE. Most of them are now higher for the past seven days, despite negative comments from analysts about the sector's prospects.
Some of the recent trading updates however surprised on the upside. Updates from Woolworths, Truworths, TFG and Massmart have been far from exuberant, but some were better than others.
Woolworths [JSE:WHL] was again one of the busiest shares and gained 0.52% to R72.16. Before Tuesday's trade, the stock was 2.29% higher over the past seven days and 10.57% over the past 30 days. Shoprite [JSE:SHP] gained 0.57% to R179.71.
Truworths [JSE:TRU], which has been the best performer in the retail sector recently, gave up some of its strong gains and traded 3.02% softer at R82.98. Before Tuesday’s trade the share gained 11.3% over the previous seven days and 21.9% over the past 30 days.
Mr Price [JSE:MRP], which gained 6.6% last week and 12.9% over the past 30 days, was also the victim of some profit-taking and lost 4.52% to R156.89.
