Caution grips investors before US rate decision
SOUTH African stocks were muted on Friday as traders held off bets ahead of a US Federal Reserve policy meeting in the coming week that could give pointers on when US interest rates will be hiked.
JSE-listed firms with operations outside South Africa benefited from data showing the US economy strengthened, but market jitters over Greece’s unresolved debt problem and the impact of higher rates in the US were a concern.
The Fed is expected to lift rates in September for the first time in almost a decade.
“Consumer confidence is improving in America,” said Owen Nkomo, an executive partner at Inkunzi Investments. “It is only going to be the volatility that will keep the market worried because people do not understand the full impact of increasing interest rates in the US.”
The JSE’s blue-chip Top 40 index flattened after early gains, shedding 0.04% to close at 46 129.91 points. The broader All Share index also gave up initial gains to end 0.1% down at 51 828.76.
MTN shrugged off strike concerns as the telecoms network operator advanced 1.8% to R221. “MTN is a high beta stock. When the market goes up, it can also go up; the weaker currency [rand] will always help MTN,” Nkomo said.
MTN, Africa’s biggest cellphone operator which also has operations in Iran and Syria, receives a portion of its earnings in dollars.
Index heavyweight Naspers, which is benefiting from its stake in China’s fast-growing Tencent Holdings, rose 2% to R1 865.89.
A setback in Greek debt talks weighed down US and European shares, with some investors also holding off bets ahead of the Fed policy meeting. The International Monetary Fund raised the stakes in Greece’s stalled debt talks on Thursday as its delegation left negotiations in Brussels because of “major differences” with Athens.
European and Greek politicians said on Friday talks would continue in a bid to reach a deal by Thursday, but for traders the news dented optimism about a debt agreement.
US investors were anticipating the Fed statement on Wednesday, to follow its policy meeting, which they hope will provide some clues to the timing of the first US interest rate hike since the 2007 financial crisis.
Wall Street was lower in Friday morning trading. At 11am in New York, the Dow Jones industrial average had fallen 0.96% to 17 865.54, the S&P 500 had lost 0.81% to 2 091.82 and the Nasdaq Composite had dropped 0.75% to 5 044.30.
MSCI’s all country world index fell 0.5% but was on track for its first weekly gain out of four. The panEuropean FTSEurofirst 300 index fell 1.3%, while MSCI’s index of Asia-Pacific shares outside Japan rose 0.35% and Japan’s Nikkei barely finished up 0.12%. —