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Uncertainty returns to the JSE

Johannesburg - Uncertainty returned to the JSE on Thursday, as all the major indices continued Wednesday’s trend when the market closed substantially lower than Tuesday’s record levels.

The reason for the uncertain sentiment has been fears that the scenario of low interest rates - on which the JSE rose to its current high levels - might soon be a thing of the past.

This is because of stronger than expected economic growth in the United States.

Not even assurances by US Federal Reserve chairperson Janet Yellen that there is no interest rate hike on the cards, could spur on the markets.

It is record low interest rates in the developed world, which support emerging markets like South Africa at its current levels, as investors are looking elsewhere for higher yields than those available in developed countries.

By midday on Thursday the All-share index on the JSE was 0.48% lower on 51 523 points, while the Top 40 index lost 0.54% to 46 341.

Amongst the other major indices the financial index lost 0.34%, the industrial index 0.43% and the resources index 0.7%.

The local market followed Wall St, where the Dow Jones closed 0.19% lower, while Standard & Poor's index was only 0.01% higher.
 
The subdued market followed the announcement by the commerce department that the US economy grew with 4.0% in the second quarter on the back of strong private investment and consumer spending.
 
The commerce department also said the economy's first-quarter slowdown was not as bad as previously thought, reducing the estimated contraction from 2.9% to 2.1%.

In a separate report, payroll company ADP said the US economy added 218 000 private sector jobs in July, slightly above the 215 000 analyst estimate.

Under normal circumstances news like that would give markets a boost, but investors instead started to worry about what will happen to interest rates if the current growth continues.

Yellen tried to calm the markets by saying that the monetary authorities are in no hurry to tighten interest rates, even if the US economy is reaching the job numbers and inflation rates which are regarded as a trigger to raise interest rates.

The South African pulp and paper maker Sappi [JSE:SAP] posted a return to third-quarter profit on Thursday, as cost cuts in its European business offset weak paper prices.

The share price, which has recently traded at record levels, fell 4.16% to R41.21.

The company warned that the demand for glossy paper has fallen as tablet computers and e-readers take a huge bite out of the traditional magazine industry and as retailers rely more on websites than printed catalogues.

Amongst resource shares Anglo American [JSE:AGL] traded 0.28% weaker on R292.80. Its subsidiary Kumba Iron Ore [JSE:KIO] lost 0.83% to R375.87.

Kumba announced that it had reached a wage agreement with the National Union of Mineworkers, which will ensure that the lowest paid workers will earn up to 18% more.

In the gold sector, Sibyane Gold [JSE:SGL] announced that its gold production increased by 8%. Its share price increased by 1.57% to R25.90 despite the news that the earnings per share had halved due to an increase in the number of shares issued.

- Fin24

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Rand - Pound
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Rand - Euro
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