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Markets begin week on back foot as commodity linked stocks trade weaker

The Johannesburg Stock Exchange ( JSE) in Sandton. Picture: Timothy Bernard

The Johannesburg Stock Exchange ( JSE) in Sandton. Picture: Timothy Bernard

Published Jul 26, 2022


The markets began the week on the back foot as the commodity-linked stocks traded weaker after gold prices fell more than 9 percent, dipping below $1 720 (R28 920) per ounce amid renewed fears of a potential recession.

The JSE All Share Index eased 0.5 percent to 67 749 points yesterday as investors continued to digest corporate earnings while the expected interest rate hike in the US later this week fuelled caution.

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US Federal Reserve chairman Jerome Powell is expected to provide clues for what will be the Fed’s stance in the weeks ahead.

The JSE Metals and Mining Index eased 3.1 percent to 44 507 points, with Gold Fields falling the most by 6.9 percent to R145.03 per share.

Harmony Gold and Anglo American Gold slumped 6.6 and 5.3 percent to R50.27 and R234.31 per share, respectively.

On Friday, gold gained 0.5 percent to close at $1 727 per ounce and was making gains extended to $1 740 an ounce, boosted by weaker bond yields.

But with global central banks raising interest rates, investors have turned to a bearish trend in gold prices and the price of the yellow metal is still in the red.

ActivTrades senior analyst Ricardo Evangelista said, “Gold prices have barely moved during early Monday trading, reflecting the performance of the US dollar, which is also trading flat.

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“Market expectations have settled on a 75 basis points rate hike by the Federal Reserve this Wednesday, and so the mood in the markets is now calmer, contrasting with the greater turbulence of previous weeks, when a rate rise of 100 basis points was, at some point, seen as likely.”

Meanwhile, the rand remained almost unchanged at R16.82 by 5pm after a good day of trading, but analysts expect some volatility the closer the markets get to the Fed decision.

On Friday, the rand broke below the R17-mark and continued onward toward the R16.80 level at a rapid rate of knots.

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Investec chief economist Annabel Bishop said the mild weakness of the US dollar, along with last week’s substantial interest rate hike in South Africa saw the rand gain.

Bishop said the markets would continue digesting the rates hike outcome this week, and the rand had room to strengthen even further, although much would depend on the signals coming out from the US.

“SA’s interest rate hikes are not expected to keep up with the moves in US interest rates initially, and consequently the rand is at risk of some further weakness this quarter, and in particular of some volatility,” Bishop said.

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“Should the Fed deliver a 100bp hike this week, the rand will likely weaken, while a smaller move could see rand strength, although the most likely outcome is the 75bp lift in the fed funds rate that the markets anticipate.”