Slow pace of vaccine roll-out sees JSE sell-off
THERE was a big sell-off of shares on the JSE last week. Fears of both further increases in US Treasury rates and a surge in inflation in developed countries triggered the sale of South African equities last Tuesday.
The fears about inflation and future interest rates were partially calmed by the US Federal Reserve’s decision last Wednesday to keep interest rates unchanged and to continue its programme of purchasing securities.
However, the selling spree continued last Thursday and Friday due to worries about the slow pace of Covid19 vaccinations outside the US, as well as further stringent lockdown measures in Europe. Italy shut schools and shops, Spain and the UK declared an emergency lockdown for a month, France for two weeks and Germany for four weeks.
These factors led to the dollar moving stronger against most currencies, particularly the pound and the euro, as well as investors disinvesting from assets in emerging countries.
Domestically, retail sales decreased 1.6 percent in January compared with the previous month and were 3.5 percent lower on last year’s pre-Covid-19 number.
The FNB/BER Consumer Confidence Index, however, moved higher to -9 points in the first quarter. This was slightly higher than -12 points in the previous quarter and a welcome improvement from -33 points in the second quarter of last year – one of the lowest scores recorded.
South Africa’s manufacturing production was down 3.4 percent in January compared with a year earlier, following a revised 1.9 percent rise in the prior month.
On South African financial markets, shares took a hammering, while bonds and the rand stood their ground.
The FTSE/JSE All Share Index lost 2 298 points, or 3.7 percent, last week. This was the biggest weekly decline since the second week in March last year, just before the lockdown.
Despite higher commodity prices, particularly for the platinum group of metals and gold, resource stocks were also sold heavily. The Resources 10 index lost 5.3 percent.
Industrials also had a negative week, and the INDI 25 index was sold off by 1.1 percent despite a strong recovery in Naspers’s share price on Friday.
Despite the stronger rand, financials had a devastating week, with the FINI15 index weakening 6.7 percent.
Listed property was sold down by 2.7 percent.
Despite a dollar strengthening against most currencies, the rand stood its ground for most of last week. At one stage, the rand traded at about R14.63 to the dollar, after trading above R15 for most of the previous weeks. At the close of the JSE on Friday, the currency was at R14.70 to the dollar, or 31 cents stronger than the R15.01 close the previous Friday. Against the pound, the rand improved to R20.41 from R20.84 the previous week. And against the euro, the rand gained 37c and traded at R17.52 on Friday.