JSE faces cautious start on Friday as Steinhoff reports

The JSE could get off to a cautious start on Friday amid mixed trading in Asia and as hard-pressed retailer Steinhoff reports interim results.

Overnight, the S&P 500 reached a record close amid growing expectations that the Federal Reserve will cut interest rates later in July in an effort to prop up the US economy.

But Asian stocks were mixed on Friday ahead of a Chinese trade data release and after US President Donald Trump stoked trade tensions once again. Trump said on Thursday China had not increased its buying of American farm products, despite agreeing to do so at the recent G20 summit.

Hong Kong’s Hang Seng index and the Shanghai Composite both rose 0.5%, while Japan’s Nikkei 225 added 0.2% and Korea’s Kospi 0.2%. But Australia’s main benchmark fell 0.2% and Taiwan’s lost 0.1%.

WeChat-owner Tencent, which influences the JSE via major shareholder Naspers, was flat in Hong Kong.

JSE-heavyweight BHP Group fell 0.8% in Australia.

Steinhoff is due to publish its half-year results for 2019 on Friday, which will finally bring its financials up to date after the retailer unveiled “accounting irregularities” in December 2017. The company is grappling with a hole in its balance sheet and legal claims from local and foreign investors.

Its shares have slipped from above R2 in early May to R1.27 at Thursday’s close, giving the global household-goods retailer a market capitalisation of just R5.5bn.

The rand remained on the front foot on Friday morning on heightened expectations for a US rate cut, with the local currency trading at R13.94/$, R17.49/£ and R15.71/€.

“With the current momentum the rand is likely to test the R13.80/$ mark,” said Bianca Botes, treasury partner at Peregrine Treasury Solutions.

But Botes said the SA Reserve Bank is likely to follow the Federal Reserve’s lead with a local interest rate cut next week.

That may see the rand “trade to the upper band of R14.15/$ provided that the global backdrop remains the same”.

The effect of a local rate cut “will probably be overshadowed by the positive effect of the expected Fed rate cut, and the expected benefits to the SA economy”.

“The local economy, however, will require more than an interest rate cut to see any significant and sustainable growth,” Botes said.

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