The JSE closed weaker on Tuesday in risk-off trade as concern about an escalating trade war between the US and China hit global markets.
Miners struggled despite the weaker rand, while rand hedges were mixed.
The rand lost nearly 2% at one point, weakening to R13.9168 before recovering slightly, which would normally benefit miners and rand hedges which have most of their assets or activities offshore. Investors remained largely on the sidelines, however, seeking safe-haven investments such as US bonds or the yen, on the day.
“It’s difficult to see how and when this ends,” said Oanda analyst Craig Erlam, adding that the clear escalation that had occurred in recent days had shaken investors and appeared to have brought an end to the good run that US stock markets had been on since the start of May.
“While Chinese stocks are faring much worse at the moment, US companies are obviously not immune to a trade war and could come under more pressure unless both sides find a solution,” Erlam said.
Naspers was hard hit on the day due to its investment of 31.2% in Chinese internet and gaming company Tencent. It ended the day 3.01% lower at R3,210.
The only real bright spot on the JSE were gold stocks, which firmed despite the gold price falling slightly, to $1,273 an ounce.
Markets received a further jolt after analysts at BlackRock, the worlds biggest asset manager, admitted the headwinds were affecting China, saying “rising trade tension with the US present a potential hurdle for China”. However, they cautioned that they saw the near-term outlook for the Chinese economy as resilient.
Local banks and retailers were particularly hard hit on the day, while property stocks also lost out, despite the local benchmark R186 yield falling in late trade amid an environment of firmer global bonds.
The US 10-year treasury yield was at 2.8742%, after having hit 3.12% last month. The UK 10-year gilt was at 1.268% from 1.3218% and the German 10-year bund at 0.3562% from 0.3946%. Brent crude slipped 0.8% to $74.69 a barrel.
The Dow was 1.5% lower at the JSE’s close, following in the footsteps of weaker European markets, where Germany’s DAX 30 lost 1.46%.
The all share closed 1.72% lower at 56,253.30 points and the top 40 lost 1.93%. Banks fell 2.35%, property 2.13%, industrials 2.1%, food and drug retailers 1.52%, general retailers 1.5%, and financials 1.49%. The gold index rose 0.66%.
Anglo American dropped 1.4% to R306.51.
British American Tobacco gained 1.59% to R669.48 but Richemont shed 2.58% to R121.29.
FirstRand lost 3.48% to R56.88 and Standard Bank 2.19% to R186.
Shoprite lost 2.32% to R220.63 and Woolworths 1.47% to R54.33.
Growthpoint lost 3.61% to R25.35.
Vodacom closed 2.8% lower at R130.