JSE continues to slide as resources take a hit
The JSE slid to a 5-week low on Thursday, as all key sectors closed in the red. Resource stocks took most of the brunt as the market took account of lower resource prices, a firmer rand, and the bearish investor outlook introduced by revisions to the mining charter which have been marketed as radical economic transformation.
The rand closed the trading session at R12.96 following the announcement from ratings agency Fitch, affirming South Africa’s sub-investment grade rating on Thursday with a stable outlook, warning weak economic growth remained a key risk.
In early April, Fitch had downgraded South Africa to BB+ from BB- on both foreign and local currency debt after a cabinet reshuffle that saw finance minister Pravin Gordhan dismissed.
A day to forget for most investors, with the blue-chip Top40 losing 1.41%, followed by the broader All Share Index which closed 1.35% lower. All sectors were lower with the Resources index down 2.03%, gold miners 0.64%, Industrials 1.15%, and Financials 1.07%.
The loser of the day went to Kumba Iron Ore [JSE:KIO] dropping 6.72% to R146.50, this move was also supported by the 62% Iron Ore Futures price shedding 1.84% to trade at $55.97
Barclays Africa [JSE:BGA] managed to claw back some of yesterday’s losses, and gained 3.28% and closed at R143.54 per share (read latest research note here). The exaggerated drop in the share price on Wednesday was triggered by news that the Barclays group had sold more shares in the local stock than initially planned.
Brent crude oil prices recovered 0.67% from yesterday's falls. Reports that U.S. crude stockpiles had fallen more than expected have helped boost markets, as well as expectations that President Trump is going to pull the U.S. out of the Paris agreement. Traders are reading this as a signal of his intention to scrap emission regulations, which would boost oil demand.
The price of gold is trading 0.23% lower at $1265, due to hawkish comments from San Francisco Federal Reserve Bank President John. C. Williams. Hawkish comments are related to increasing interest rates in accordance with inflation targeting.
Gold and copper drifted weaker in Asia on Thursday as a key measure of China manufacturing showed a dip into contraction in May. On Wednesday China reported official manufacturing PMI for May at 51.2, compared with a level of 51.0 seen, and steady with 51.2 in April.