JSE likely to weaken on Friday as US markets enter correction territory

The JSE must contend with a sea of red on global markets on Friday morning, with global stocks pummeled by the rapid rise in cases of the coronavirus.

The rand and commodities have not been spared, with the local unit on track for its fifth-consecutive session of losses, and trading at a 19-month low to the dollar.

The Dow Jones index slumped 4.4% on Thursday, and Asian markets followed suit on Friday morning, with Japan’s Nikkei faring worst in losing 4%.

US markets are now in correction territory, meaning they are down more than 10% from their February highs.

The World Health Organisation has warned the coronavirus has pandemic potential, and the number of cases, and countries reporting cases, is rising — with Nigeria reporting its first case.

Offsetting this is the hopes of stimulus. Pricing for central bank policy easing continues to shift almost by the minute, said National Australia Bank analyst Ray Attrill in a note.

According to Bloomberg’s calculations on Friday morning, the market attaches a roughly 50% chance to a March quarter-point US Federal Reserve rate cut with 75 basis points of easing now fully priced for January 2021, said Attrill.

Locally, the enthusiasm that followed the budget speech on Wednesday is fading, with Moody’s Investors Service, the only agency with an investment-grade rating on SA’s debt, voicing its scepticism on Thursday about proposed cuts in the public sector wage bill.

In morning trade on Friday the Shanghai Composite had lost 3.37% while the Hang Seng had fallen 2.50%.

Tencent, which influences the JSE via Naspers, had slumped more than 3%.

The rand was 0.74% weaker at R15.60/$, having lost 3.5% over the past five days. The local currency on Friday reached its worst level since September 2018.

Platinum had plunged 3.05% to $874.54/oz while gold had slipped 0.39% to $1,638.47/oz. Brent crude was down 0.93% to $50.94 a barrel.

Focus on Friday is likely to be on the coronavirus, though there are a number of corporate earnings reports on the calendar.

African Rainbow Miners is expected to report a slight fall in profit for its six months to end-December, as lower earnings from manganese, nickel and coal offset higher earnings from iron ore and platinum group metals (PGM).

Northam Platinum is expected to report a jump in earnings in its half year to end-December, due to higher PGM prices.

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