MARKET WRAP: JSE slips as trade war weighs on risk assets

The JSE closed lower on Friday, falling for a second consecutive week, as escalating US-China trade tension has countered positive post-election sentiment.

The all share tracked weaker global markets on Friday, recording broad-based losses. It fell 0.63% to 56,183.2 points and the top 40 0.55%. Banks dropped 2.49% and the financial index 1.92%. Diversified miners, however, added 0.55%.

An executive order signed by US President Donald Trump aimed at banning Huawei equipment in the US took effect on Thursday, prompting threats of retaliation from China.

There were also contradictory messages regarding the resumption of US-China trade negotiations, reported Dow Jones Newswires, with a Chinese official saying that negotiations had been “severely hampered” by higher tariffs imposed by the US last week.

This weighed on the rand, although analysts noted the local currency would have probably fallen further if it were not benefiting from some positive post-election sentiment.

As the JSE closed the rand was 0.74% weaker at R14.3959/$, having lost 1.65% so far this week.

The week ahead is a busy one, including both inflation data for April, as well as a Reserve Bank interest-rate decision. The Bank is not expected to lower interest rates, despite SA’s tepid economic growth.

“The neutral tone in US monetary policy, indicative of stable US interest rates for the majority of this year, [is] likely for SA as well,” Investec chief economist Annabel Bishop said in a note.

Markets are also watching for any signs of the composition of President Cyril Ramaphosa’s new cabinet, which will be closely scrutinised as investors wait to see how effective he will be in pursuing an anticorruption and pro-growth agenda. Ramaphosa is expected to appoint his cabinet next Sunday, a day after his inauguration.

Global focus remains on the US-China trade war, and possible further tit-for-tat retaliation between the world’s two largest economies.

Naspers was once again one of the worst-performing shares this week, extending its 7.99% plunge in the second week of May. The market heavyweight closed 1.66% lower at R3,319.10 on Friday, and gave up 3.09% in the week. On Wednesday, the Competition Commission recommended that the Competition Tribunal bar it from acquiring vehicle sales website WeBuyCars.

Rand hedge Richemont jumped 4.88% to R104.61 and British American Tobacco added 2.08% to R542.61.

Aspen Pharmacare added 0.57% to R104.80, after saying New Zealand authorities had approved the sale of its nutritionals business there to Lactalis.

Tsogo Sun gave back 0.23% to R21.34. It said earlier that adjusted headline earnings per share (HEPS) for its year to end-March were expected to be between 3% and 7% lower than in the prior corresponding period.

Lewis Group added 3.43% to R32.90. It said earlier it expected HEPS to rise by between 20% and 25% for its year to end-March.

Shortly after the JSE closed the Dow had fallen 0.13% to 25,831.25 points, while in Europe, the FTSE 100 had given up 0.18%, the CAC 40 0.44% and the DAX 30 0.77%.

Gold was down 0.84% to $1,275.59/oz and platinum 1.64% to $819.53. Brent crude inched 0.22% lower to $72.62 a barrel.

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