Johannesburg - South African stocks fell the most since June 27 on Monday, heading for a one-month low, as commodity prices dropped amid speculation the US Federal Reserve is leaning toward policy tightening that would reduce demand for riskier assets.
The benchmark FTSE/JSE Africa All Share Index slumped 1.9 percent to 52,346.69, the lowest since August 17 on a closing basis, as of 9.54am in Johannesburg. Raw-materials producers led the declines, with the 15-member FTSE/JSE Africa Mining Index dropping 3.9 percent as shares in miners including BHP Billiton, Anglo American and Assore slumped.
The MSCI Emerging Markets Index of stocks slid 4.2 percent over the past two days after comments by Federal Reserve Bank of Boston President Eric Rosengren that the world’s biggest economy could overheat should policy makers wait too long to tighten. The comments came a day after European Central Bank chief Mario Draghi surprised markets by playing down the prospect of further stimulus. Any hawkish shift in her rhetoric may stoke volatility in financial markets, which on Friday put the probability of a hike in borrowing costs this month at 30 percent.
“It’s a general risk-off scenario globally sparked by the suggestions that the Fed might hike rates next week after all,” Stephen Meintjes, a senior analyst at Momentum SP Reid, said by phone from Johannesburg. “This is the market just adjusting for the possibility that they might well hike.”
The US central bank’s policy-setting Federal Open Market Committee meets September 20-21 to discuss its target range for overnight interest rates, which has been left unchanged at 0.25 to 0.5 percent since a hike in December that marked the first in nearly a decade. A slowdown in economic growth, sluggish inflation, and increased uncertainty about the outlook have so far prevented another move.
The Bloomberg Commodity Index dropped for a second day as prices of oil and industrial metals including copper declined, while iron ore fell to the lowest since June. Kumba Iron Ore, Africa’s biggest producer of the mineral, declined 3.9 percent while diversified miner Anglo American slumped 4.3 percent.
BLOOMBERG