Rand weaker ahead of likely US interest rate hike

The US Federal Reserve is expected to raise its interest rate to 2% from 1.75% at 8pm South African time on Wednesday.

The rand slid to trade at R13.34 to the dollar, R15.66 to the euro and R17.82 to the pound at 7am as the dollar strengthened after US inflation for May came in higher than the economists’ consensus — making it a near certainty the US Federal Open Market Committee (FOMC) will vote for a rise of 25 basis points in interest rates.

On the JSE, only Brait is diarised to release results, and this is based on when it released its results in 2017 as it has not issued a trading statement saying when it will publish its results for its 2018 financial year to end-March.

But there is plenty of international corporate news to rattle the Johannesburg bourse.

Hong Kong-listed ZTE slid as much as 41% to HK$14.98 as it resumed trading after a two-month suspension. The Chinese telecommunications equipment supplier was found guilty of selling technology to Iran and North Korea in contravention of sanctions, resulting in a $1.4bn settlement with the US government.

This contributed to Hong Kong’s Hang Seng index falling 0.62%, with Naspers’s 31%-owned Tencent down 0.05% to HK$417.20.

AT&T fell nearly 3% while Time Warner rose 4.5% in after-hours trading after a US court overruled President Donald Trump’s opposition to the telecommunications company acquiring the media group.

“Trump, a frequent detractor of Time Warner’s CNN and its coverage, denounced the deal when it was announced in October 2016. US District Judge Richard Leon found little to support the government’s arguments that the deal would harm consumers, calling one position ‘gossamer thin’ and another ‘poppycock’,” Reuters reported.

Statistics SA is scheduled to release April’s retail sales report at 1pm on Wednesday.

Investec Bank economist Lara Hodes forecast annual retail sales growth will have moderated to about 4.5% in April from 4.8% in March.

The March figure was boosted by consumers making purchases ahead of the one percentage point increase in VAT which came into effect on April 1 along with other taxes.

Retail forms part of the trade sector of GDP, and during the first quarter contributed 0.4% to the overall 2.2% quarterly decline in GDP.

“The retail sales update for April will provide some indication of whether the weak momentum followed through to the start of the second quarter,” Hodes wrote in her weekly note e-mailed on Friday.