JSE retreats on long-awaited Biden stimulus plan of $1.9 trillion
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JOHANNESBURG - THE MARKET retreated on Friday as stocks held back after US President-elect Joe Biden's long-awaited $1.9 trillion (about R30 trln) rescue plan triggered a risk-off sentiment.
The JSE All Share Index fell 0.52 percent, down to 63 549.75 points from its recent all-time highs as the markets became wary of hikes to corporate taxes and minimum wage.
The Top40 Index also eased 0.49 percent to 58 446.35 points as resources, mining, and retailers stocks all fell into the red.
The JSE's biggest stock, Naspers, declined 0.97 percent to R3 364.92, while Sasol also eased 0.64 percent to R169.90.
Mining stocks fell 1.48 percent to 61 008 points led by Anglo American,
which was 3.4 percent down to R19.53 a share, followed by DRDGold at 1.10 percent to R16.17.
Harmony Gold and Gold Fields gained 1.48 percent to R67.70 and 1.08 percent to R140.00, respectively, while Sibanye-Stillwater was 0.9 percent higher to R62.71.
Retail stocks eased 0.46 percent to 4 503 points as Woolworths fell 1.82 percent to R38.75, Pick n Pay eased 0.28 percent to R49.85, while Shoprite rose 1.5 percent to R134.96.
Biden last week unveiled his $1.9trln economic and health-care emergency relief package, which directly delivers aid to American families, businesses and communities.
The package also has a major focus on Covid-19 testing, vaccine production and delivery as the pandemic surges to record highs in the US.
FXTM market analyst Han Tan said the markets were apprehensive following Biden's foreboding remarks in addressing his proposal's costs.
Tan said a lot of the optimism surrounding another injection of US fiscal stimulus had already been priced-in ahead of the keenly awaited announcement.
He said there was already chatter that the incoming Biden administration may not stop at just $1.9trln and could roll out more fiscal stimulus.
“Although such expectations have in the recent past buoyed risk assets, investors may refuse to get carried away with more of the same headlines,” Tan said.
“If the incoming fiscal support is accompanied by more risk sentiment dampeners, such as the threat of heightened regulations, that may not give equities such a big boost.”
The rand was not spared the risk-off mode as it closed Friday 0.09 percent weaker to R15.24 against the dollar,
However, FXTM senior research analyst Lukman Otunuga was optimistic, saying the rand had fought back after depreciating against G10 currencies at the start of the week.
“It is up almost 2 percent against the dollar since (last) Monday, mainly due to external factors, while a sense of optimism around South Africa securing 20 million doses of Covid-19 has contributed to the rand's upside.
“Given how the dollar is set to weaken on the reflation trade and the Federal Reserve is keen to maintain its ultra-accommodative monetary stance into the foreseeable future, the outlook for the rand remains encouraging.”
Economists now say since the SA Reserve Bank may leave interest rates at a record low of 3.5 percent this quarter, this might hinder rand gains.