Bourse slides on recession news

The JSE closed weaker on Tuesday as general retailers, banks and property stocks retreated on news that SA had fallen into a recession with two consecutive quarters of GDP contraction.

The rand weakened more than 3% to the dollar at one stage, partly in response to a stronger dollar against the euro, and as investors sold off local stocks and bonds following the release of the GDP numbers.

The softer rand, with a higher Brent crude price, heightens the likelihood of further interest rate increases by the Reserve Bank. This would depress consumer spending further.

The prospects of any meaningful improvement later in 2018 appear dim. “The economy could embark on a recovery over the rest of this year, but a sharp rebound is unlikely,” said Capital Economics analyst Jason Tuvey. “The latest data will further dent hopes that Cyril Ramaphosa’s presidency will lead to a marked turnaround in SA’s economic fortunes.”

The all share closed 1.4% lower at 57,891.80 points and the top 40 lost 1.42%. General retailers fell 4.27%, banks 4.17%, financials 2.58%, food and drug retailers 2.25%, industrials 1.76%, platinums 1.1% and property 0.83%. The gold index rose 0.62% and resources 0.55%.

Discovery slumped 4.12% to R170.95. It earlier reported that overall group income in the year to end-June grew 16.8% to R52.8bn and net profit 27.6% to R5.7bn.

First-Rand shed 5% to R67.05 and Absa 4.2% to R157.03. Shoprite dropped 2.27% to R201.33 and Woolworths 2.89% to R53.07.

Redefine Properties lost 0.68% to end at R10.19.

Naspers closed 0.67% lower in trading at R3,183.61.

After weakening to R15.3724/$ during the day, the rand made a marginal comeback towards the JSE’s close, to R15.2344. It was at R19.546 to the pound after falling to an intraday worst of R19.7138. The rand is trading at its weakest level in two years.

Local bond yields rose sharply, with the benchmark R186 last bid at 9.21% from 9.02%. The US 10-year treasury was last seen at 2.8976% from 2.8622%.

The top 40 Alsi futures index dropped 1.89% to 51,318 points. A total 27,605 contracts were traded from Monday’s 16,932.