The JSE closed weaker in line with European stock markets on Wednesday, driven by inflation concerns on the back of rising oil prices and the prospect of protracted war in Ukraine.
Brent crude extended Tuesday’s gains and was last trading at $107.57 a barrel, up 2.8%, after data showed Russian oil and gas condensate production has fallen to 10-million barrels a day in the wake of sanctions imposed after its invasion of Ukraine.
Adding to the bullish sentiment around oil prices were warnings from Opec that members may struggle to replace any lost supply from Russia. Hopes for a ceasefire in Ukraine were dashed after Russian President Vladimir Putin said peace talks were “at a dead end”.
With the oil price back above $100 a barrel, investors are concerned that inflationary pressures will remain elevated and hamper economic growth, said IG senior market analyst Shaun Murison.
“Global oil remains in tight supply. The demand side for oil has temporary waned with the pandemics disruption to economic activity in China. On balance it appears that risks to oil prices remain to the upside,” he said.
“The war is ongoing without an end in sight, so supply from Russia appears very unlikely to return to market any time soon. Demand from major importers such as China is expected to gradually improve as pandemic disruptions abate,” Murison added.
UK annual consumer price inflation leapt to 7.0% in March from 6.2% in February, its highest since March 1992, and by more than expected by most economists in a Reuters poll, official data showed on Wednesday. The increase was broad-based, ranging from vehicle fuel to food and furniture, adding to the biggest cost-of-living squeeze in Britain since records began in the 1950s.
The European Central Bank will be meeting on Thursday and while the market does not expect a move in rates, a more hawkish tone might be offered. Money markets are pricing in about 70 basis points of tightening by December.
The JSE all share lost 0.89% to 73,141.92 points and the top 40 shed 0.87%. Banks fell 2.25%, financials 2.19% and industrials 1.24%. Industrial metals bucked the trend, though, gaining 1.08%.
At 6.35pm, the Dow Industrial average was 0.53% firmer at 34,400.93 points. London’s FTSE 100 and France’s CAC 40 closed little changed, while Germany’s DAX was 0.43% lower.
At 6.25pm, the rand was 0.26% softer at R14.5557/$, and had weakened 0.79% to R15.8439/€ and 1.13% to R19.0534/£. The euro was 0.55% firmer at $1.0886.
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