MARKET WRAP: JSE lower as global markets retreat on renewed Trump threat

The JSE closed weaker on Tuesday with industrials faring worst as renewed threats by US President Donald Trump against China saw investors shun equities for the safe haven of bond markets.

Naspers led industrial shares lower amid risk-off sentiment, while gold shares gained.

Trump signaled his intention to impose tariffs on $50bn in Chinese imports and curbs on investments in sensitive technology. The White House said a final list of covered imports will be released by June 15 and the tariffs will be imposed “shortly thereafter”.

The Dow was 1.10% lower in its first trading day of the week, following in the footsteps of weaker Asian and European markets. The FTSE 100 and the DAX 30 each lost more than 1%.

Trump’s threat came at a time of continued turmoil in European markets with still no sign of a new Italian government, as the focus shifted to Spain, where the present government is also set to be unseated.

The all share closed 1.62% lower at 55,935.80 points and the top 40 dropped 1.84%. Industrials lost 2.43%, food and drug retailers 2.38% and banks 1.67%. The gold index jumped 4.04%.

Naspers closed 3.65% lower at R3,088.21.

FirstRand was off 2.12% to R60.

The rand weakened to R12.6883 to the dollar, before recovering marginally to R12.63, while the euro was at $1.1550 from $1.1624.

Global bond markets felt the effects of the potential economic crisis in the eurozone. German bunds led the volatile fixed-income trade, with the 10-year yield at one point tumbling more than 20%, before stabilising in later trade.

In an unusual move, the yield on the benchmark 10-year US treasury fell sharply in a stronger dollar environment. When yields rise, the dollar usually firms, while lower yields usually point to a weaker greenback.

The US 10-year treasury reached 2.8233% from 2.9277% in intra-day trade. The yield rose to 3.12% earlier in the month, its highest level in seven years.

The gains in the dollar came despite renewed dovish comments from US Fed officials. “This showed the market was seriously worried about the situation in Europe, or it was not taking the Fed officials for their word, and they expect that the Fed will hike more than their forward guidance is telling us,” said TreasuryOne dealer Andre Botha.

The R186 was bid at 8.545% from 8.43%.

The top 40 Alsi futures lost 2.07% to 49,756 points. The number of contracts traded was 21,143 from Monday’s 10,796.