JSE in for unsure day as China rumours and US poll news swirl

The JSE is in for an unpredictable day as global markets monitor what happens in the midterm elections in the US on Tuesday, rumours continue to circulate about China easing its zero-Covid stance and new consumer inflation data from the US on Thursday to take stock of the fight against high inflation.

The Nikkei jumped 3.42%, the Hang Seng was level and the Shanghai composite fell by 0.52%. Year to date the Hang Seng is down  28.73%, the Shanghai composite 15.70% and the Nikkei 4.68%.

Tencent, which influences the JSE via Naspers and Prosus, advanced 1.06% on Tuesday morning, but has plunged 45.35% so far this year.

Rumours about China’s Covid-policy stance continue to cause market volatility, despite authorities denying reports.

“As the day [Monday] proceeded it was clear that the market was prepared to take a ‘where there’s smoke, there’s fire’ view on China’s zero-Covid policy, assuming that there probably will be some easing of restrictions, even if over a long period of time, enough to provide a glimmer of hope about China’s economic path through 2023,” Bank of New Zealand senior market strategist Jason Wong said in a note.

Traders in Hong Kong remain wary of what might happen in mainland China, while Japanese markets were lifted by Wall Street’s gains.

In local market news, the rand firmed on Monday to levels last seen a month ago, while the JSE pared earlier losses amid mixed global peers, with investors turning their focus to US inflation data this week.

The JSE all share gained 0.19% to 69,439 points, while the top 40 was little changed. The precious metals and mining index added 0.97%, financials were up 0.76%, banks collected 0.69%, resources firmed 0.48% and industrials metals garnered 0.22%. Industrials lost 0.258%.

US markets closed higher on Tuesday as the Dow Jones gained 1.31%, the S&P 500 0.96% and the Nasdaq 0.85%. The Nasdaq has lost just under one one-third (33.27%) of its value so far this year, the S&P 500 over one-fifth (20.63%) and the Dow Jones 10.27%.

All eyes will be on the midterm elections on Tuesday where the US House of Representatives, about one-third of the Senate and key state governorships are up for grabs.

“Newswires are pinning the latest increases onto a pre-midterm election rally, with expected Republican gains being cited as positive for bonds and therefore for equities,” Asia-Pacific head of research Robert Carnell and chief China economist Min Joo Kang at the ING Group said in a note.

A good showing by the Republicans is likely to see former president Donald Trump formally confirm another run for presidency in 2024, Wong said.

Meanwhile, traders are also waiting for the latest CPI data from the world’s largest economy on Thursday. Higher-than-expected inflation could indicate that the pivot away from hiking interest rates by the US Federal Reserve could be further away than expected.

The rand depreciated by 0.14% against the dollar, trading at R17.75. The rand has depreciated by 11.28% against the greenback so far this year.

The price of commodities declined. Platinum retreated 0.33% to $974.40, Brent crude 0.33% to $97.56 a barrel and gold 0.28% to $1,670.52/oz.

In corporate news, financial services and technology group Lesaka Technologies, formerly group Net1 which was involved in the Sassa debacle, will release its first quarterly results of its 2023 year after the close of US markets.

No economic data is expected.

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