JSE set for a bad end to the week after ECB buzzkill

The JSE is set to open in the red on Friday after the European Central Bank’s (ECB) move to boost the eurozone spooked investors about the state of the global economy.

A more dovish ECB on Thursday delayed rate hikes and launched a new stimulus package aimed at helping banks lend more.

The move, partly based on Europe’s dimmer growth and inflation prospects, prompted emerging-market currencies, including the rand, to fall relative to the dollar, said GT247.com trader Musa Makoni.

The ECB’s dovish tone had “set the stage for a global equity sell-off”, Makoni said.

The S&P 500 index closed 0.8% down overnight, while in Asia, the Hang Seng index was 1.5% down at the lunch break on Friday. Japan’s Nikkei 225 index was 2.1% lower in early afternoon trade.

Tencent, the flagship asset of JSE-heavyweight Naspers, was 2.3% down in Hong Kong, setting Africa’s largest public company up for a negative end to the week.

JSE-listed BHP Group was 1.4% lower in Australia.

Financial services group MMI Holdings, along with a number of small- and mid-cap groups, is due to report results on the JSE on Friday.

Aspen Pharmacare reported interim results after the market’s close on Thursday.

The drug manufacturer said its commercial pharmaceuticals business in emerging markets did well, although this was offset by a decline in revenue from manufacturing. Earnings were diluted by higher financing costs.

Aspen said profits after tax in the six months to end-December fell 19% to R2.9bn.

Meanwhile, the rand continued to weaken on Friday morning. The local currency was 0.07% down versus the dollar, at R14.52. Against the pound it was 0.13% weaker at R19.01/£ and it was 0.09% worse off against the euro at R16.25/€.

“Thursday can be described as nothing short of a bloodbath for the rand that had already started the day on the back foot,” said Bianca Botes, corporate treasury manager at Peregrine Treasury Solutions.

Besides the ECB’s move, the rand was also hurt by President Cyril Ramaphosa’s announcement that government will proceed to nationalise the SA Bank, Botes said.

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