The JSE tracked US and European markets lower on Tuesday as prospects of four Federal Reserve rate hikes this year and persistently high inflation put a damper on sentiment.
Global stocks saw a cautious day with US trading resuming after a public holiday as investors continued to fret over tighter monetary policy and inflation.
Market activity so far in 2022 has been driven by expectations of rising interest rates in the US. Markets have been pricing in the prospect of a US interest rate increase as soon as March, which has put pressure on tech shares as higher rates will erode the relative value of their future earnings.
As investors watch US corporate earnings reports this week and consider the outlook for the country’s economy, global investment bank Goldman Sachs reported disappointing earnings. Benchmark US bond yields rose on Tuesday.
“Once again the surge in US bond yields is putting growth stocks under pressure with tech names in Europe and the US leading losses,” said Oanda senior market analyst Craig Erlam.
“In addition to the prospect of four rate hikes this year and worries about the persistently high inflation, strategists are also becoming increasingly concerned about the prospect of an early start to the reduction in the size of the Fed’s balance sheet, with a significant withdrawal of liquidity seen as having a negative impact on asset prices,” said Erlam.
The JSE all share lost 0.84% to 74,955 points and the top 40 0.88%. Precious metals fell 2.25%, industrials 1.23%, financials 1.03%, retailers 1.02%, banks 0.95%, food producers 0.89% and resources 0.25%.
Naspers and Prosus tracked the tech-heavy Nasdaq, falling 1.4% in Europe. Naspers dropped 3.44% to R2,528.65 while Prosus shed 3.42% to R1,308.46.
Tencent, which influences the JSE via Naspers, fell 2.75%.
The Dow Jones industrial average fell 1.53% to 35,363 points. In Europe, London’s FTSE 100 lost 0.51%, France’s CAC 40 0.72% and Germany’s DAX 0.84%.
Earlier in Asia, the Shanghai Composite added 0.8%, while Hong Kong’s Hang Seng lost 0.51% and Japan’s Nikkei 0.27%.
At 5.42pm, the rand had weakened 0.61% to R15.4767/$, 0.22% to R17.5713/€ and 0.27% to R21.0224/£. The euro was 0.42% weaker at $1.1352.
Gold was little changed at $1,818.96/oz and platinum added 1.38% to $990. Brent crude was 1.18% firmer at $87.52 a barrel.
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