MARKET WRAP: JSE loses steam in line with global markets

The JSE ended weaker on Tuesday as losses mounted in the resources sector despite relatively range-bound metal prices and a weaker rand.

The market followed its counterparts in Europe and the US — where the Dow Jones Industrial Average and S&P 500 were each just over 1.6% lower at 7.02pm after being closed for a public holiday on Monday.

The all-share index shed 1.28% to close at 78,811.05 points, as the resource 10 index lost 3% and precious metals and mining stocks tumbled 2.13%.

Equities markets in general appear generally be losing momentum in February after a blockbuster start to the year, with investors apparently booking profits made in January amid uncertainty about the course of US interest rates.

Locally, the reporting season is taking shape against the backdrop of a deepening energy crisis as Eskom’s fleet of old and poorly maintained coal-fired plants suffer repeated breakdowns.

Tiger Brands said in a trading update on Tuesday that it was spending R1.5m a day on backup power during stage 6 load-shedding — when 6,000MW is removed from the grid — raising questions about how long, SA’s biggest food company can absorb the extra costs before passing them along the value chain.

Eskom has said load-shedding is inevitable for the next two years because of the shortfall in generation capacity. To help mitigate the fallout, President Cyril Ramaphosa has declared the energy crisis a national state of disaster and has announced he will appoint an electricity minister in the presidency  to manage the situation. Critics say the measures and the appointment are unlikely to end debilitating power cuts any time soon.

SA-focused stocks have largely been resilient to the energy crisis, though retail stocks have been softening since January.

The national budget will take centre stage on Wednesday against a backdrop of myriad competing interests.

“The market is looking chiefly to a resolution on the transfer of Eskom debt [in the budget speech]  and obviously practical initiatives on fiscal consolidation,” said Ashley Dickinson, head of fixed-income dealing at Sasfin Wealth. “There is very little wiggle room for the finance minister though, so it is going to be a challenging balancing act.” 

On commodity markets, the platinum price was up 1.45% to $940.20/oz, while the rand was down almost 1% to R18.24/$, close to its weakest level since November.

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