MARKET WRAP: JSE drops due to volatile equity markets

The JSE retreated along with global equity markets amid ongoing concern about heightened market volatility driven by a retail trading frenzy, even as positive vaccine news boosted optimism about a recovery from the Covid-19 pandemic.

The rand strengthened after December data showed SA reported its eighth consecutive, monthly trade surplus and Reserve Bank governor Lesetja Kganyago said there is room for further stimulus should the country experience a third wave of Covid-19.

Johnson & Johnson said on Friday its single-dose vaccine was 72% effective against Covid-19 in the US though only 66% effective in Latin America and 57% in SA, where a more contagious variant is largely responsible for a surge in infections. 

Importantly, in a sub-study of 6,000 volunteers in SA in the J&J vaccine trial, it was 89% effective at preventing severe disease — and 95% of cases in the SA portion of the trial were infections with the SA variant.

“While global growth is expected to remain notably below pre-pandemic estimates, a mass vaccination rollout, while uneven between countries, will support economic recovery and international trade,” Lara Hodes, an economist at Investec, wrote in a client note.

The JSE all share closed 1.2% lower at 62,472 points and the top 40 fell 1.3% to 57,312 points. Naspers, which accounts for about 21% of the top 40’s value, fell 1% to R3,478, while Prosus, its international internet arm, weakened 1.4% to R1,754.40.

Sasol rallied the most since January 7, up 9% to R164.44, following the release of a positive trading update.

At 5.09pm, the rand had firmed 1.1% to R15.04/$, 0.9% to R18.27/€ and 1.1% to R20.64/£. The dollar was moderately weaker against the euro and little changed against the pound as investors weighed positive vaccine news with volatile stock market swings.

The S&P 500 fell 0.5% to 3,769 points in early New York trade. Gold gained 0.9% to $1,862/oz, while platinum climbed 2.1% to $1,091. Brent crude added 1% to $56.06 a barrel.

US equity markets have experienced extreme volatility this week as retail investors piled into previously obscure or unflavoured stocks such as GameStop and BlackBerry, causing wild swings in their price in a deliberate attempt to inflict losses on short-sellers.

SA’s R2030 government bond firmed, with the yield falling less than four basis points to 8.74%. Bond yields move inversely to their prices.

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