JSE drops on US-China tensions

The JSE closed lower on Monday as renewed tension between the US and China, after questions about the origin of Covid-19, weighed on sentiment.

Global equities were in negative territory after US President Donald Trump said on Sunday that China had made a “mistake” that caused the rapid spread of the novel coronavirus, CNBC reported. US secretary of state Mike Pompeo said there is significant evidence that Covid-19 originated from a laboratory in China.

“Trade tension between China and US, that could slow a global economic recovery, has reared its ugly head once more. Emerging market currencies and riskier assets have been sold off while global stock markets have taken a hammering,” said TreasuryONE senior currency dealer Andre Botha.

The JSE all share dropped 2.28% to 49,186.59 points and the top 40 2.36%. Banks fells 5.88% and financials 4.18%.

Shortly after the JSE closed, the Dow was down 0.80% to 23,534.65 points. In Europe, the FTSE 100 lost 0.15%, France’s CAC 40 4.39% and Germany’s DAX 3.58%.

The comments made by the US have sparked concern about the prospects of an escalated US-China trade war which could weigh on an already strained global economy.

“Trump explicitly mentioned tariffs as a preferred way to extract money out of China as compensation for their role in the coronavirus pandemic. Investors again face the difficult job of predicting Trump’s next action on trade,” said London Capital Group head of research Jasper Lawler.

At 5.49pm, the rand had firmed 0.69% to R18.7067/$, 1.35% to R20.4069/€ and 1.10% to R23.2445/£. The euro had weakened 0.64% to $1.0909.

The yield on the R2030 government bond fell seven basis points to 10.2%. Bond yields move inversely to their prices.

Gold added 0.48% to $1,7063/oz and platinum 0.73% to $765.30. Brent crude was down 0.38% to $26.69 a barrel.

Earlier, Hong Kong’s Hang Seng fell 4.18% and Japan’s Nikkei 225 2.84% while the Shanghai Composite was closed for Labour Day.

Locally, Absa’s purchasing managers’ index fell to 46.1 index points in April from 48.1 previously as the national lockdown weighed on factory activity, while new vehicle sales in April fell 98%.