JSE set for another cautious start on Wednesday

SA stocks could open mixed again on Wednesday, taking their cue from Asian markets, following better-than-expected retail sales data from the US and amid simmering trade tensions.

The US dollar rose overnight thanks to healthy US retail sales data, which slightly reduced the need for an interest rate cut in the world’s biggest economy.

However, “the strong retail sales print had little impact on market pricing for a July rate cut, with most Fed officials still lining up behind a cut”, National Australia Bank analyst Tapas Strickland said in a note.

At the same time, “trade rhetoric remains on the strong side”, with no signs that tensions will abate any time soon, Strickland said.

Chinese officials indicated that the country is preparing for a protracted trade spat and is in no hurry to reach a deal, while US President Donald Trump said in a tweet he could put further tariffs in place against China.

“Stocks remain resilient to the trade tensions, supported by aggressive Fed easing,” Strickland said.

The S&P 500 index fell 0.3% overnight as technology stocks declined amid concerns about greater scrutiny from Trump’s administration.

“Tech stocks have been one of the biggest drivers of the rally, so regulatory headwinds should be a focus for stocks as well as the current earnings season,” Strickland said.

Hong Kong’s Hang Seng index was 0.3% down on Wednesday morning, while mainland Chinese markets were mixed. Japan’s Nikkei 225 lost 0.3% and Korea’s Kospi 1.1%.

Australia’s main benchmark added 0.4% after board minutes from the country’s central bank indicated it was positioned to provide further support to the economy “if needed”.

WeChat-owner Tencent, which influences the JSE via major shareholder Naspers, rose 0.2% in Hong Kong.

JSE-heavyweight BHP Group was 1.2% higher in Australia. The miner, which will publish an operational review for the year to end-June on the JSE on Wednesday, said earlier iron ore output rebounded in the fourth quarter following a disruptive cyclone in March.

Output was likely to grow in the coming year amid rising prices, it said.

Meanwhile, Statistics SA will publish retail trade sales data for May on Wednesday. FNB chief economist Mamello Matikinca-Ngwenya said last week the bank expects “another relatively steady reading in May, supported by an uptick in household credit appetite, well-contained inflation and deep discounting from some retailers”. 

The Reserve Bank’s monetary policy committee will meet ahead of an expected interest rate announcement on Thursday. Analysts expect the committee to cut interest rates thanks to lower rates in major economies and domestic inflation being in check.

Elsewhere, the UK and EU will both release consumer inflation readings on Wednesday, while the US will release housing starts figures.

The rand was slightly weaker on Wednesday morning at R13.97/$, R17.35/£ and R15.67/€.

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