MARKET WRAP: JSE slips as food and drug retailers suffer big fall

The JSE slipped on Tuesday in line with most major equity markets, with retailers under the most pressure after downbeat full-year results from Shoprite.

Food and drug retailers slumped 3.06%, their biggest one-day fall since January 30, after Shoprite said on Tuesday that its trading profit fell 14.3% to R6.8bn in the year to end-June. Shoprite’s share price slumped 9.25% to R126.86 and Pick n Pay’s 5.71% to R56.84 after the former said its basic headline earnings per share fell by 19.6% to 708.8c.

Sentiment was fragile as talks of stimulus packages from major economies contended with news that Italy’s Prime Minister Giuseppe Conte resigned on Tuesday, further increasing the chances of a fresh election. Germany’s central bank also warned that Europe’s largest economy is headed for a recession.

There was also some caution ahead of the release of US Federal Reserve meeting minutes on Wednesday, as well as Fed chair Jerome Powell’s speech at the Jackson Hole economic symposium on Friday. Markets have already priced in at least two further US rate cuts in 2019. Senior market analyst at Oanda Craig Erlam said the markets may have set themselves up for disappointment, considering Powell’s somewhat hawkish tone in the past.

“What’s interesting is that this huge void between Fed signals and market positioning stems from the fact that markets have had no time for remarks that indicate a gradual easing at best. Their response has been to fully price in rate cuts and assume the Fed will do as its told, like a naughty school child,” Erlam said.

Shortly after the JSE closed, the Dow was flat at 26,138.23 points. In Europe, the FTSE 100 had lost 0.72%, France’s CAC 40 0.44%, and Germany’s DAX 30 0.4%. The Shanghai Composite fell 0.11% and Hong Kong’s Hang Seng 0.23%, while Japan’s Nikkei 225 rose 0.55%.

The JSE all share fell 0.19% to 54,280.80 points and the top 40 0.21%. Resources lost 0.64% and industrials 0.15%.

Long4Life rose 0.25% to R4.01. The company’s CEO Brian Joffe said on Tuesday that its half-year earnings for the six months to end-August will likely fall due to the poor performance of Chill Beverages.

Harmony Gold rose 3.82% to R47.02m, after reporting on Tuesday that its headline earnings per share increased by 19% to R2.04 in the year to end-June.

BHP Group fell 2.66% to R323.32. The global mining company earlier declared a dividend of $0.78 for the full year to end-June. 

Blue Label Telecoms dropped 5.76% to R3.11 after the company said on Monday that it expects its earnings to fall by 20%  for the full year to end-May.

KAP Industrial rose 0.41% to R4.89 after the company said on Tuesday that its headline earnings per share decreased 25% to 45.9c in the year to end-June.

At 6.15pm, the rand had firmed 0.77% to R15.3499/$, 0.65% to R17.0252/€, and 0.56% to R18.6545/£. The euro had strengthened 0.13% to $1.1092.

Gold was up 0.46% to $1,502.69/oz while platinum was down 0.65% to $845.65. Brent crude lost 0.67% to $59.36 a barrel.

Statistics SA is scheduled to release consumer price inflation figures for July on Wednesday. The consensus is for inflation to have decelerated to 4.3% year-on-year from 4.5% in June, according to a Bloomberg poll.

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