JSE flattens as risk-on sentiment proves to be fleeting

After a firm opening, the JSE turned flat on Thursday morning as earlier risk-on sentiment fizzled out on renewed strength in the dollar.

After weakening to $1.16 to the euro in overnight trade, the euro was at $1.1563 soon after the JSE’s opening, putting some pressure on the rand.

Choppy trade in the rand made it difficult for investors to find direction, with the local currency at first firming to R14.1455 to the dollar, before weakening to R14.40 in later trade.

In their latest minutes, US Federal Reserve members expressed concern that trade disputes might affect the US economy. That might lessen the likelihood of further interest-rate hikes in 2018.

However, the dollar turned around again as the market priced in further hikes, with at least another two expected until December. The dollar tends to firm on the prospect of higher rates.

“Comments from Fed members on the possible slowdown of the US economy in the second quarter of the year, and the risk for trade disputes to hurt business investment, initially put downward pressure on the greenback,” Oanda analyst Alfonso Esparza said.

The market was now awaiting Fed chair Jerome Powell’s address on Friday at the central bank meeting in Jackson Hole. Analysts expect four more rate hikes — two of 25 basis points in 2018 and two in 2019 — before the Fed runs out of runway on its tightening policy, Esparza said.

Early-market focus was on retailers with Woolworths reporting annual numbers and Massmart on interims. Naspers was flat and miners under pressure on a softer Brent crude price.

The Dow closed 0.34% lower as the Fed indicated it would continue with rate hikes, despite trade concerns. Asian markets were mixed with the Nikkei 225 up 0.22%, but the Hang Seng slipped 0.49%.

At 9.28am the all share was 0.04% up at 58,149.80 points and the top 40 was unchanged. Food and drug retailers added 0.86%, property 0.44% and industrials 0.13%. General retailers dropped 1.3%, banks 0.43% and resources 0.28%.

Anglo American was 1.34% lower at R289.42.

Imperial Holdings slipped 0.81% to R200.35.