The rand was weaker on Friday morning, while the JSE tracked weaker US markets overnight owing to US-China tension risks and interest rate cut prospects, which weighed on major tech companies.
Emerging market currencies are also weaker.
News that US President Joe Biden’s administration was considering the most severe trade restrictions available if companies continued to ship advanced semiconductor technology to China, sparked concern about potential trade tension between the world’s biggest economies.
The US government has already blocked Chinese access to advanced chips and the equipment to make them, citing security concerns. It has urged its allies to follow suit.
“The stronger dollar and fears of a broader trade war between the US and China are weighing on market sentiment,” said TreasuryOne currency strategist Andre Cilliers. “However, the dollar gains are capped as markets price in a September rate cut by the Fed and a possible two further cuts this year.”
At 11.12am, the rand had weakened 0.57% to R18.3528/$, 0.32% to R19.9618/€ and 0.36% to R23.6964/£. The euro was 0.17% weaker at $1.0878.
Meanwhile, the technology sector continued to struggle amid the market’s rotation on hopes of easing monetary policy by the US Federal Reserve.
A significant change in investor sentiment has occurred in the markets over the past week: there has been a continuation of the broader shift away from major tech stocks. Investors are dumping shares of artificial intelligence companies as the growing likelihood of a September interest rate cut by the US Fed bolstered optimism in the broader market, reported Bloomberg.
Big technology stocks have soured in the past months, fuelled by a frenzy surrounding AI technology. This has propelled a select few Big Tech stocks, including Nvidia to record highs, sparking concerns that they have become overvalued.
At 10.50am, the JSE all share had lost 0.73% to 79,746.07 points and the top 40 was down 0.83%. Precious metals had fallen 2.48%, resources 2.11%, industrial metals 1.4%, industrials 0.56%, food producers 0.41%, retailers 0.36%, banks 0.17% and financials 0.14%.
At the same time in Europe, the FTSE 100 had lost 0.44%, France’s CAC 40 0.46% and Germany's DAX 0.74%.
Earlier in Asia, the Shanghai Composite added 0.17%, while Hong Kong’s Hang Seng fell 2.05% and Japan’s Nikkei 0.16%.
In the commodities market, gold lost 1.15% to $2,416.73/oz and platinum 0.89% to $961.4/oz. Brent crude was 0.37% firmer at $85.09 a barrel.
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