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JSE extends losses as Reserve Bank keeps rates unchanged


25 May.png

JSE extends losses as the Reserve Bank keeps rates unchanged

The South African Reserve Bank kept the repo rate unchanged at 7%, which was in line with market expectations. StatsSA also released PPI data which came in better than expected at 4.6%, on the back of an estimate of 4.9%.

The SARB noted that they were happy with the short-term prospects for inflation, after the recent CPI year-on-year number was recorded at 5.3%. The reserve bank is more concerned with the long-term prospects for inflation, which they forecast to test their upper target of 6%.

On the JSE, most of the blue chip stocks were trading in the red led by Rand hedge stocks which continued to slide due to the firmer Rand. Financials and Retailers also traded lower due to investors taking a bit of caution before the SARB announced its rate decision. The firmer Rand dragged gold miners lower on the JSE despite Gold trading in positive territory for the day. Impala Platinum took quite a tumble after the announcement that they were going to launch new 2022 Convertible Bonds, the stock closed the day down 9.77%.

The JSE All-Share Index closed down 0.52%, with the blue-chip Top 40 also closing down 0.52%.  Resources were dragged down by gold miners, eventually closing the day 2.04% weaker. Financials were down 0.07%%, & Retailers shed 2.88%. Industrials closed in the red, down 0.15% but the media giant, Naspers, managed gains of 0.44%. This was after the Tencent Holdings closed up more than 1% on the Hang Seng.

The Rand extended its gains against the greenback managing to reach highs of R12.84 against the US Dollar. This was mainly due to the weakness in the US Dollar, which has remained under pressure since the ouster of the FBI director by the US President. There was no significant improvement in the US Dollar despite slightly better than expected Initial Jobless Claims numbers. The next big set of data from the US is the quarter-on-quarter GDP data expected tomorrow, but we will have to wait & see if that is the turning point for the currency.

Brent Crude slipped today after OPEC was said to have agreed to extend output cuts for another 9 months. This was disappointing as investors expected the cuts to last longer than that. Brent Crude slipped to $52.72 per barrel shortly after the announcement, before recovering to trade at $53.39 per barrel when the JSE closed. US Crude Oil Inventories dropped by 4.4 million barrels last week, which was the seventh consecutive week of declines. That would have given OPEC members a bit of relief going into today’s meeting.

Metals were slightly positive in today’s trading. Gold was trading at $1255.56 per ounce when the JSE closed, up just over $3 on the day. Platinum also closed in positive territory after having reached lows of $943.69 per ounce in early morning trading. However these gains were not seen in JSE listed platinum & gold miners due to the firmer Rand.

Musa Makoni, Trading Desk at GT247.com, For Fin24
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