South African stock markets snapped the three-day gains yesterday as investors continued to fret about the prospect of further monetary tightening from major central banks.
This comes as the local bourse had closed in the green on Wednesday, as stronger Chinese factory data revived hopes for a global economic rebound.
The JSE All Share Index fell more than 1.5% to around 77 415 points after consecutive sessions of advances due to the prevailing fear of higher for longer interest rates, after hawkish comments from US Federal Reserve officials.
Barloworld, Naspers, and Investec led the losses with 5.9%, 5.1% and 4.7% to R90.56, R3 230 and R110.70 per share, respectively.
South Africa was not the only one to be affected as emerging market stocks edged lower, with the hawkish comments from Fed officials weighing on sentiment.
In the US, Atlanta Fed president Raphael Bostic called for continued rate hikes to above 5% to restrain inflation.
Minneapolis Fed president Neel Kashkari also said the central bank’s rate hikes were not having much of an impact on the services sector.
At the same time, analysts are looking for more evidence to gauge China’s economic recovery following positive manufacturing data for February.
Citadel Global director Bianca Botes said the economic backdrop remained unchanged, with the focus still firmly on inflation and the impact any tighter monetary policy will have on global growth.
“Bonds and stocks felt pressure in overnight trade. Developed market inflation indicators continue to point to sticky inflation, which sent US Treasury yields to fresh highs,” Botes said.
“Growth optimism in China, however, capped some of the losses and supported commodity-linked markets.”
In commodities, gold prices eased toward $1 830 (R33 276) an ounce, also snapping a three-day advance on jittery investors being spooked by the hawkish Fed.
Gold is highly sensitive to the rates outlook, as higher interest rates raise the opportunity cost of holding non-yielding bullion and vice versa.
Meanwhile, local investors have been anticipating President Cyril Ramaphosa’s Cabinet reshuffle, and appointing a minister of electricity within a few days.
Ramaphosa announced the creation of the Ministry of Electricity last month during his State of the Nation Address, saying that the new minister will specifically deal with ending load shedding.
However, Investec chief economist Annabel Bishop said reported corruption at Eskom was still a key concern, involving the theft of both taxpayer money and tariff payers’ money.
Bishop said recommendations for the externalisation of procurement at Eskom were finding merit as breakdowns at electricity-generating units were believed to be purposely engineered to create room for corruption and malfeasance.
“The escalation in breakdowns this year has contributed to the rise in the stages of load shedding and damage to power plants, with Eskom and Nersa indicating preparations for schedules that include load shedding rising well above Stage 10,” she said.
“Such an event would see the economy move into recession… We believe persistent Stage 6 load shedding and above would be sufficient, with the state as yet seemingly unclear in its response to stamping out this reported new developing crisis of the sabotage of Eskom,” Bishop said.
BUSINESS REPORT