The JSE tracked weaker global markets on Thursday as investors digested corporate earnings reports from mega tech companies and key inflation data in the US.
Investor optimism for a big tech-driven stock boost faltered after disappointing quarterly reports from Meta and Microsoft. Meta’s user growth fell short of expectations, while Microsoft’s revenue guidance underwhelmed investors.
Both companies announced increased spending on artificial intelligence infrastructure, fuelling concerns about pressure on profitability. As a result, shares of Meta and Microsoft declined, with other tech shares also falling.
“The lacklustre earnings reports sparked worries about the prospects of big tech companies amid rising artificial intelligence costs,” said Stephen Innes, a partner at SPI Asset Management.
The JSE all share fell 1.58% to 85,384 points — the biggest one-day fall in more than a month, with major indices weaker. The top 40 was down 1.68%.
At 6.10pm, the Dow Jones industrial average was 0.58% weaker at 41,897 points, while markets in Europe were weaker.
Meanwhile, the personal consumption expenditures (PCE) index — the US Federal Reserve’s most preferred inflation measure, rose 2.7% annually in September, exceeding expectations of 2.6%.
Meanwhile, initial jobless claims dropped to a five-month low of 216,000, beating estimates of 230,000. These developments come ahead of Friday’s crucial monthly jobs report — the nonfarm payrolls October report, which follows an unexpected surge in private payrolls in October.
Locally, investors digested the medium-term budget policy statement (MTBPS) in which, among other points, finance minister Enoch Godongwana noted that the position of government debt had deteriorated over this fiscal year.
SA’s 10-year government bond yield rose five basis points to 9.5%, having risen 20 basis points earlier.
“The MTBPS disappointed bond investors,” said Stanlib asset manager and head of fixed income Victor Mphaphuli.
“In the current fiscal year, revenue collection is weaker and expenditure greater than expected, with the budget deficit seen at 5% versus 4.5% projected in February.
“The 10-year government bond peaked at 10.5% after the speech from 10.35% earlier. However, the risks to revenue collection are on the upside and there is no risk of an imminent credit downgrade,” he said
The rand was little changed for most of the session, “as the MTBPS failed to excite the investor community”, RMB head of forex execution Matete Thulare said.
At 6.34pm, the rand was little changed at R17.6431/$ and R19.1564/€, while it had strengthened 0.62% to R22.7025/£. The euro was unchanged at $1.086.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.