The JSE ended weaker in a volatile session on Wednesday, adding to Tuesday’s heavy losses, with the all share index falling a further 0.45% to close at 67,964.02 points.
Banking stocks were hit hardest, with the index dropping 2.1%, the lowest since mid-July, suggesting heightened concerns about the sector’s growth prospects even as interest rates rise. Higher rates are generally good for banks because it improves their revenue from loans, but the concern is that borrowers are more likely to default in the current economic climate.
Resource shares were mostly marginally lower on the day, but remain in deep correction territory given the uncertain economic outlook in China, world’s biggest commodity consumer. However, platinum group metals companies bucked the trend to close higher.
Construction shares remained under severe pressure, though the sectoral index isn’t a big contributor to the overall market. Cement maker PPC fell 2.67% to R2.55 after publishing an operational update in which it reported that cement volumes were flat in the five months to end-August. Murray & Roberts recovered almost 1% but is still down 37% over a rolling one-month period.
There were patches of light, however, with coal producer Thungela gaining 2.65% to R360. Exxaro was up 1.53% to R231.69.
Insurance company Momentum Metropolitan jumped 3.4% reporting that normalised headline earnings per share for the year to end-June leapt to R2.87 from 67c a year earlier.
Market heavyweight Naspers also held up, closing 1% higher at R2,470.
Europe’s leading stock markets were also lower, though the US’s tech-heavy Nasdaq rebounded in early trade after plummeting 5% a day earlier.
Global markets slumped on Tuesday after the US reported worse-than-expected inflation in August, reigniting fears continued steep increase in interest rates by the Federal Reserve.
While US headline inflation slowed to 8.3% year on year in August from 8.5% in July, core inflation — which excludes volatile energy and food and is the Federal Reserve’s preferred measure of prices — accelerated to 6.3% from 5.9%.
“There appears to have been a tendency in recent months to front-run certain releases in the hope that it’s going to prove to be the “pivot” moment when everything starts to look up, central banks can ease off the brake and risk assets will have bottomed,” Craig Erlam, senior market analyst Oanda said in a note.
“That certainly looks to have been the case over the past week as investors were lured into a false sense of security following the July CPI release only to be brought back down to earth with a bang by the August report.”