JSE enjoys 10 consecutive positive sessions, gaining 8% in two weeks
While the US factors that helped stimulate gains on the local bourse will ultimately only benefit its own economy, they wouldn’t necessarily be positive for SA or other emerging markets, said Capicraft Investment Partners analyst Drikus Combrinck. “We will take our cue from what emerging markets do over the next few months. Trade talks could continue to be negative, and some [emerging markets] are taking real strain.”
The JSE’s bank and retail indices were the worst performers on Wednesday, with the rand giving the bourse the bulk of its direction.
The rand continues to be under pressure from an ongoing slide in the Turkish lira, although analysts have noted the risk to European banking stocks due to that crisis seems to have receded. Further risk could come from Italy, with rising bond yields in that country beginning to prompt concern that Italy’s financial issues may spill over into the euro, which the rand often tracks.
According to reports, the Italian government is lobbying the European Central Bank (ECB) for it to continue quantitative easing, as bond yields rise in Italy, which has been searching for allies to support its bonds in recent weeks. The US and China have voiced concern about the widening in Italy’s bond yield spread over its eurozone peers, said Oanda vice-president of market analysis Dean Popplewell.
Investors are looking at Italy’s issues as a localised problem, said BK Asset Management MD Kathy Lien.
Comments from government officials that Italy may breach the EU’s 3% deficit target, however, could prompt a credit-ratings downgrade of Italy’s sovereign debt, which would affect the euro, said Lien.
Trade-war issues remain the biggest concern facing markets, said NKC African Economics analyst Gerrit van Rooyen. “The ideological divide between the US and China is strong and neither side looks very willing to bend to the other’s demands.”
Source: businesslive.co.za
