JSE dips ahead of Trump decision

The JSE closed weaker on Friday as markets awaited US President Donald Trump’s announcement on new policies towards China. Trump has said that his administration was not happy with Beijing. Larry Kudlow, Trump’s top economic adviser, said that China would be “held accountable” and that it had made a “huge mistake” in passing its new security law on Hong Kong.

The JSE closed weaker on Friday as markets awaited US President Donald Trump’s announcement made on the day on new policies towards China.

Trump has said that his administration was not happy with Beijing, while Larry Kudlow, Trump’s top economic adviser, said that China would be “held accountable” and that it had made a “huge mistake” in passing the new security law on Hong Kong, though it remains unclear what the ramifications will be.

Hong Kong’s government warned on Friday that withdrawing its special status with the US, which has underpinned it as a finance hub, could be a “double-edged sword”, while urging the US to stop interfering in its internal affairs, reported Reuters.

“We’re seeing a far more cautious tone at the end of the week as deteriorating relations between the US and China weigh on sentiment,” said Oanda senior analyst Craig Erlam.

“There’s a wide range of ways the US could respond [to China’s move], which is what’s making people nervous, especially as it’s likely to lead to another tit-for-tat spar between the two countries.”

The JSE all share lost 1.76% to 50,483 points and the top 40 1.89%. Platinum miners dropped 3.01%, industrials 2.6%, financials 2.44% and banks 1.88%. The gold mining index gained 0.85%.

The rand weakened, in line with other emerging-market currencies. At 5.38pm, it was down 0.5% to R17.6022/$, 0.74% to R19.5179/€ and 0.47% to R21.6391/£. The euro added 0.52% to $1.1123.

“The rand is on the back foot as risk sentiment erodes.

“Investors are concerned about a possible hard-line stance [by the US] and we have seen equity and riskaverse currencies being sold off and gold firm,” said TreasuryONE senior dealer Andre Botha.

Despite weakening on the day, the rand gained 5.77% to the dollar in May, due to a lift in sentiment from the reopening of economies around the world and optimism over potential coronavirus vaccines.

Gold gained 0.99% to $1,734.81/oz, while platinum lost 0.18% to $832.75. Brent crude was up 1.36% to $35.84 a barrel.

Locally, SA will enter level 3 lockdown restrictions on Monday, with the vast majority of workers able to return to work.