JSE opens weaker in risk-off trade as Fed sends mixed signals

The JSE opened weaker on Thursday in risk-off trade following the US Federal Reserve’s decision to raise interest rates by 25 basis points to a range of 1.75%-2%.

Banks and retailers were up after the rand recovered to R13.19 to the dollar at the opening, after weakening to R13.44 on Wednesday.

The Fed’s decision was expected. Initially the market took a hawkish view on the Fed’s forward guidance, with the probable number of further hikes this year increasing to a further two from one, which would bring the total rate increases for the year to four instead of the priced-in three.

However, mixed signals from Fed chairman Jerome Powell at the news conference led the market to believe the Fed was less hawkish than initially thought. Attention then shifted to the European Central Bank’s (ECB’s) meeting later on Thursday.

Speculation is rife that ECB president Mario Draghi will announce the unwinding of the bank’s asset-buying programme later in the year, causing the euro to firm against the dollar.

“The question is if Draghi will announce the start of tapering, or kick the can further down the road,” said TreasuryOne dealer Andre Botha.

The Dow closed 0.47% down on Wednesday, as Boeing and Caterpillar both lost more than 1.5%. The Nikkei 225 was off 0.99% and the Hang Seng 0.87% as Asian markets followed the Dow on Thursday.

Naspers was lower at the opening in JSE trade, despite releasing what appeared to be an upbeat trading update on Wednesday, saying it expected headline earnings per share (HEPS) to rise by between 130% and 135% in the year to end-March, when compared with the previous year’s results.

However, investors appeared to be confused as the company stated that it had amended its calculation of core headline earnings and restated earlier numbers. Projections range from a 40%-45% rise in core HEPS to a 380%-390% rise in earnings per share (EPS).

A weak opening by Chinese internet company Tencent in Hong Trade also did not help. Naspers owns 31.2% of Tencent and Tencent remains the main driver of share price growth for Naspers.

At 10.02am the all share was down 0.4% at 58,204.80 points and the top 40 lost 0.51%. Resources dropped 0.87% and industrials 0.64%. The gold index added 1.33%, food and drug retailers 0.73%, banks 0.71% and property 0.62%.

Anglo American slipped 1.04% to R315.

Richemont lost 1.13% to R123.19.

Harmony jumped 4.56% to R21.09.

Barclays Africa gained 1.21% to R164.69 and FirstRand 1.29% to R61.89.

Growthpoint rose 1.08% to R27.10 after announcing the launch of SA’s first healthcare-focused property company.

Vodacom added 0.95% to R138.80.

Naspers dropped 1.65% to R3,337.05.