JSE jittery ahead of US rate talks

The JSE did not escape the uncertainty after mixed performances on Wall Street and on  Asian markets and a weaker start by European markets.

There seems to be a growing consensus amongst commentators that the Federal  Reserve will bring forward its timetable to raise interest rates, which will have a major influence on markets worldwide, including emerging markets like South Africa. The yields of US bonds are already beginning to discount such a possibility.

By midday on Tuesday, all the major indices on the JSE were down, with the All-share index losing 0.73% to 51 004 points and the Top 40-index trading 0.68% lower on 45 720 points.

The big loser was the Industrial index which at one stage gave up 1.05%, while the Financial index lost 0.44%. Resources were slightly lower, down 0.06%, as investors used the opportunity to pick up bargains in an oversold sector.

Analysts do not expect an announcement on higher interest rates after this week’s two-day Fed meeting, but it will read the wording of the Fed’s statement carefully for any clue about when it will start raising interest rates.

Up till now the Fed’s standard comment was that it would keep interest rates low for a "considerable time" after ending its massive stimulus programme, and any variation on that will be interpreted negatively. It is also widely expected that the Fed will further reduce the monetary easing programme after its meeting, setting the stage for a full termination at the end of October.

For South Africa the future movements of US interest rates are even more important than local rates - which will also be re-considered this week - as higher US rates will have a massive influence on the flood of overseas money that is currently supporting the South African markets and finances the massive deficit on the current account.

SABMiller [JSE:SAB], which propped up the Industrial index on Monday on takeover talks, fell back and dragged the rest of the index down with it. SABMiller, which raced 13% higher before closing 9.66% firmer on reports that it unsuccessfully tried to take over Heineken in an effort to stave off an expected takeover bid from Annheuser-Busch In Bev, lost a third of its Monday gains.

By midday, SABMiller traded 3.09% lower on R648.22. After Monday's action the share price is now 16.7% higher for the last month and 34% stronger for the year.

Amongst the other heavyweights in the sector British American Tobacco [JSE:BAT] lost 1.53% to R638.48 and Richemont [JSE:CFR] traded 0.21% weaker on R102.82. Naspers [JSE:NPN] was 1.39% softer on R1 264.97. All these shares are very popular with overseas investors and will be affected by a change in US monetary policy.

MTN [JSE:MTN] improved with 0.89% to R249.60 on Tuesday after an announcement that it has significantly increased it borrowing capacity, fuelling acquisition rumours.

Telkom [JSE:TKG], which had a remarkable run after strong results a couple of months ago, was for the second day the victim of profit taking. It lost 7.78% on Tuesday morning to R53.72 after losing more than 5% on Monday. The share price is however still 158.6% higher for the year.

Anglogold Ashanti [JSE:ANG] moved very little on Tuesday morning after announcing that it’s proposed restructuring and rights issue will not continue after a revolt amongst overseas shareholders. The share price lost 13% last week in reaction to the news and on Monday  rose 9% before closing only 2% higher. On Tuesday the share price was only 0.12% stronger on R149.18.