JSE faces weaker Asian markets on Friday as inflation concerns spook investors

The JSE faces sharply lower Asian markets on Friday, with US markets under severe pressure overnight, as concerns about future inflation prompted investors to once again sell off bonds.

The tech-heavy Nasdaq slumped 3.52% and the Dow Jones 1.7%, while in morning trade on Friday Tencent was down 2.7%. The rand also had its worst day in eight months on Thursday, plunging 3.6% against the dollar.

With discussions among the Democrats pointing to as much as $3-trillion (R45-trillion) in infrastructure spending and the pandemic continues to normalise, bond traders wasted little time pricing in a hyper-stimulated and inflated return to normalcy, said Axi chief global strategist Stephen Innes in a note.

Tech stocks are susceptible to rising yields because their value rests most heavily on future earnings, which get discounted more negatively when bond yields go up, said Innes. Bond yields move inversely to bond prices.

Japan’s Nikkei had lost 2.76% on Friday morning and the Hang Seng 2.43%.

Gold was flat at $1,770.53/oz while platinum had risen 0.44% to $1,223.36/oz. Brent crude was 0.54% weaker at $66.54 a barrel.

The rand slipped below R15/$ overnight, having weakened about 50c, or 3%, since the budget announcement on Wednesday.

The rand was 0.25% weaker at R15.04/$, extending a 3.6% loss on Thursday, its worst day since June 2020.

Locally, private sector credit extension data for January is due out later, as is balance of trade numbers for the same month.

Hotel group City Lodge is expected to report a normalised headline loss of up to R246.6m in its six months to end-December later, having been hard hit by Covid-19 restrictions. The group has a market value of about R2.1bn.

ICT group Blue Label Telecoms is due to report its results for the six months to end-November later, saying in a recent trading update profits are expected to be little changed, and it has been resilient in difficult trading conditions.

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