JSE closes lower as shock GDP data drag down banks and retailers

The JSE ended a three-day winning streak on Tuesday, after shock GDP numbers caused banks and retailers to retreat, while miners climbed on the weaker rand.

The all share pared losses toward the close, after being down 0.5% at one stage, as bargain hunters entered the market at oversold levels.

The prospect of subdued growth for the rest of the year, and as further interest-rate cuts become more unlikely, drove rate-sensitive stocks down. However, resources climbed on the falling currency, with gold stocks also making a late recovery.

The fragile growth outlook makes the prospect of an interest-rate hike in the near term unlikely, Rand Merchant Bank (RMB) analysts said. The Reserve Bank would be likely to keep rates on hold at 6.5% for the remainder of this year, turning progressively hawkish in 2019, RMB said.

GDP contracted by 2.2% in the first quarter of 2018 compared with the final quarter of 2017, while economists had expected a fall of just 0.5%.

“GDP data for the first quarter showed a substantial contraction in the local economy,” said IG SA market analyst Shaun Murison. New leadership in SA post-December 2017 had seen business confidence within the country much improved. “However, while business confidence had improved, the local economy unfortunately has not.”

The rand lost nearly 2% on the day, falling to R12.7979 to the dollar from R12.5664, while against the pound, it dropped from R16.7296 to R17.0729.

The Dow was flat at the JSE’s close, while technology stocks remained buoyant after the Nasdaq hit a record high on Monday, Dow Jones Newswires reported.

At the same time European markets were mixed, with the FTSE 100 lower on a firmer pound, while the Dax 30 had risen 0.6%.

Oil prices were lower after reports that the US government asked Saudi Arabia and other Opec producers to raise oil supplies. Brent crude lost 1.65% to $74.12 a barrel.

Platinum was down 0.6% to $894.80 an ounce.

The all share ended the day 0.16% lower at 57,779.10 points and the top rose 0.02%. Banks dropped 3.4%, general retailers 2.28%, financials 1.85%, food and drug retailers 1.24% and property 0.83%.

Resources rose 1.92% and the gold index 1.85%.

Anglo American lifted 2.71% to R317.94.

Richemont added 1.93% to R119.10 and Naspers 0.86% to R3,297.

Standard Bank slumped 3.91% to R208.15 and Nedbank 3.39% to R274.94.

Among property stocks, Delta relinquished 2.08% to R6.11, after saying on Monday it intended cutting its dividend in the financial year.

MTN was down 2.22% to R116.24.

The top 40 Alsi futures index lost 0.63% to 51,455 points. The number of contracts traded was 23,475 from Monday’s 29,197.