The JSE all share ended the shortened week sharply lower
on Thursday in broad-based losses after the US Federal Reserve increased
rates for the first time this year.
Gold shares bore the brunt of the decision, with most miners hit hard on a stronger dollar.
Analysts said it was not so much the rise of 25 basis points to 0.75% that affected sentiment, as that was expected, it was the more hawkish projections for next year and 2018 that spooked the market.
The Fed now envisages three further increases of 25 basis points in 2017, followed by another three in 2018, taking US rates to a "normal" 3%.
The hawkish stance led to a firmer dollar with US treasuries sold off. The rand weakened in response, while miners were hit by a double whammy as commodity prices fell.
In the early evening, spot gold was 1.16% lower at $1,129.38 and platinum dropped 1.19% to $912.
Higher production prices released earlier further affected sentiment negatively, as it indicated consumer inflation may remain stubbornly high in the first half of 2017. If the rand weakens further on the Fed’s stance, the Reserve Bank may be forced to hike local rates.
The producer price index (PPI) rose to an annual 6.9% in November from a previous 6.6%, coming in slightly higher than market expectations of 6.8%.
The stronger rand mitigated an even worse number, said Investec economist Kamilla Kaplan. "This had alleviated import price pressures of raw materials and intermediate goods for producers," she said.
The all share closed 2.02% lower at 49,691.30 points and the blue-chip top 40 lost 2.01%. The gold index plummeted 8.62%, resources lost 2.99% and platinums 2.68%. The property index was 2.82%, with food and drug retailers giving up 2.05%.
The all share ended the volatile week 2.37% off and is 1.98% lower for 2016.
The Dow Jones was 0.31% up in late morning trade, while European markets were firmer, with the FTSE 100 gaining 0.25%, the Paris CAC 40 0.72% and Germany’s Dax 0.46%.
Sanlam Investment Management economist Arthur Kamp said the US rate increase was only the second since the 2008 crisis. The Fed deemed the present hiking cycle necessary as president-elect Donald Trump’s fiscal plans implied a sustained regression in the Federal budget and a rising federal debt ratio.
"The scale of Trump’s proposed fiscal policy may not be realistic, paving the way for higher inflation," he said.
Kamp said more aggressive hikes could accelerate the depreciation of the rand, with the knock-on effect of higher local inflation, as import prices rose.
"Rand-hedge shares on the JSE should be mostly insulated from potential currency weakness, but retailers, industrials and financials would be most vulnerable to a rising interest rate cycle."
Kamp added that listed property was also vulnerable, given the sensitivity of the sector to interest rates and an increase in bond yields.
Anglo American led the losses among the big miners, losing 4.65% to R199.65 and BHP Billiton dropped 2.92% to R228.01.
British American Tobacco was one of the few stocks ending the day stronger, adding 0.22% to R780.44.
Anglo American Platinum dropped 5.50% to R259.07.
Harmony Gold tumbled 9.81% to R26.10, Gold Fields was 9.43% lower at R36.80 and Sibanye retreated 6.09% to R22.50.
Nedbank fared worst of the big four, down 2.48% to R231.61, FirstRand shed 1.53% to R52.20, and Barclays Africa was 2.20% lower at R165.12.
Sanlam was 3.43% lower at R60.83 with Liberty Holdings shedding 2.53% to R108.20.
Steinhoff was 2.98% lower at R68.48 and Shoprite 2.62% to R174.28.
Growthpoint dropped 3.86% to R24.42, Resilient 4.63% to R106.50, Hyprop 3.90% to R111.24 and Liberty Two Degrees 4.67% to R10.
Naspers was 1.79% lower at R1,974.06, with Brait 2.86% off at R83.91.
Gold shares bore the brunt of the decision, with most miners hit hard on a stronger dollar.
Analysts said it was not so much the rise of 25 basis points to 0.75% that affected sentiment, as that was expected, it was the more hawkish projections for next year and 2018 that spooked the market.
The Fed now envisages three further increases of 25 basis points in 2017, followed by another three in 2018, taking US rates to a "normal" 3%.
The hawkish stance led to a firmer dollar with US treasuries sold off. The rand weakened in response, while miners were hit by a double whammy as commodity prices fell.
In the early evening, spot gold was 1.16% lower at $1,129.38 and platinum dropped 1.19% to $912.
Higher production prices released earlier further affected sentiment negatively, as it indicated consumer inflation may remain stubbornly high in the first half of 2017. If the rand weakens further on the Fed’s stance, the Reserve Bank may be forced to hike local rates.
The producer price index (PPI) rose to an annual 6.9% in November from a previous 6.6%, coming in slightly higher than market expectations of 6.8%.
The stronger rand mitigated an even worse number, said Investec economist Kamilla Kaplan. "This had alleviated import price pressures of raw materials and intermediate goods for producers," she said.
The all share closed 2.02% lower at 49,691.30 points and the blue-chip top 40 lost 2.01%. The gold index plummeted 8.62%, resources lost 2.99% and platinums 2.68%. The property index was 2.82%, with food and drug retailers giving up 2.05%.
The all share ended the volatile week 2.37% off and is 1.98% lower for 2016.
The Dow Jones was 0.31% up in late morning trade, while European markets were firmer, with the FTSE 100 gaining 0.25%, the Paris CAC 40 0.72% and Germany’s Dax 0.46%.
Sanlam Investment Management economist Arthur Kamp said the US rate increase was only the second since the 2008 crisis. The Fed deemed the present hiking cycle necessary as president-elect Donald Trump’s fiscal plans implied a sustained regression in the Federal budget and a rising federal debt ratio.
"The scale of Trump’s proposed fiscal policy may not be realistic, paving the way for higher inflation," he said.
Kamp said more aggressive hikes could accelerate the depreciation of the rand, with the knock-on effect of higher local inflation, as import prices rose.
"Rand-hedge shares on the JSE should be mostly insulated from potential currency weakness, but retailers, industrials and financials would be most vulnerable to a rising interest rate cycle."
Kamp added that listed property was also vulnerable, given the sensitivity of the sector to interest rates and an increase in bond yields.
Anglo American led the losses among the big miners, losing 4.65% to R199.65 and BHP Billiton dropped 2.92% to R228.01.
British American Tobacco was one of the few stocks ending the day stronger, adding 0.22% to R780.44.
Anglo American Platinum dropped 5.50% to R259.07.
Harmony Gold tumbled 9.81% to R26.10, Gold Fields was 9.43% lower at R36.80 and Sibanye retreated 6.09% to R22.50.
Nedbank fared worst of the big four, down 2.48% to R231.61, FirstRand shed 1.53% to R52.20, and Barclays Africa was 2.20% lower at R165.12.
Sanlam was 3.43% lower at R60.83 with Liberty Holdings shedding 2.53% to R108.20.
Steinhoff was 2.98% lower at R68.48 and Shoprite 2.62% to R174.28.
Growthpoint dropped 3.86% to R24.42, Resilient 4.63% to R106.50, Hyprop 3.90% to R111.24 and Liberty Two Degrees 4.67% to R10.
Naspers was 1.79% lower at R1,974.06, with Brait 2.86% off at R83.91.
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