Picture: MICHAEL ETTERSHANK
THE JSE closed substantially weaker on Friday following the release of positive US jobs data, with mining stocks worst hit as losses spread across the board.
The all share at one point dropped nearly 2.5%, but recovered toward the close on a firmer Wall Street opening.
The stage is now set for a probable US rate hike after crucial nonfarm payroll data in the US came in much better than expected.
US employers added a seasonally adjusted 271,000 jobs in October, way better than the expected 182,000. Figures for the prior two months were also revised up by a combined 12,000 to 153,000 for August and 137,000 for September.
Barclays Research said in a note the October payroll report was very solid and exhibited broad-based strength. "It suggests that labour markets have fully rebounded after slowing in August and September."
They now expected a rate hike to materialise in December. Previously it was expected to happen in March 2016. Even though rates could be hiked they are likely to remain low for some time. "We now forecast a federal funds range of 25-50 basis points in December, up from the current 0-25 basis points," Barclays said.
Global markets were positive by the JSE’s close with the FTSE 100 gaining 0.41%. The Paris CAC 40 was 0.60% higher and the Dax had gained 1.38%. The Dow opened marginally higher, up 0.14%.
At 5pm the all share closed 2.05% weaker at 52,964.10 and the blue-chip top 40 had dropped 2.09%. The all share ended a volatile week 1.54% weaker after at one point being just 700 points off its record high.
The gold index led the losses on the day, closing 7.54% lower, resources lost 5.74% and platinums were down 5.18%. Banks shed 1.85% and financials lost 1.67%. Industrials were down 1.59%.
Investec Asset Management portfolio manager Clyde Rossouw said markets were reacting to changing economic cycles brought about by a higher interest rate environment.
Normal cycles produced an abundance of economic growth, which was good for the performance of average businesses. "The cycle up to now is far from normal."
Despite a US Fed rate hike now more likely, low commodity prices and relatively low bond yields pointed to depressed levels of economic activity. "The question is, should one consider investing in growth assets if there is no meaningful growth?"
Mr Rossouw expected merger and acquisition activity to increase in the new environment. "We could see more of the type of AB InBev/SABMiller takeover deals happening."
Among individual shares on the JSE, Glencore declined 7.48% to R24.25. BHP Billiton dropped 6.43% to R207.35 as investors worried about the damage caused by a dam burst at a Brazilian iron-ore operation it jointly owns.
Sasol was 3.26% down at R435.65 after the Brent crude price fell a further 1.19% in late trade to $47.43.
ArcelorMittal pared earlier losses which saw it plummeting 12%, but still closed 8.16% lower at R7.20. The steel maker announced on Friday it intended to raise between R4bn and R4.5bn through a rights offer to recapitalise the company.
Sibanye Gold lost 9.73% to R19.40.
Among banks Standard Bank shed 2.17% to R140 and Nedbank was 1.98% lower at R222.50. FirstRand lost 1.78% to R50.72.
Lonmin continued shedding value, losing 12.21% to R3.74 after closing more than 14% lower on Thursday.
Luxury goods group Richemont dropped 6.61% to R112.50 after on Friday reporting a 22% increase in profit to €1.1bn for the six months to the end of September. Sales were up 15% in euro terms.
MTN closed 2.80% lower at R157.45.
Source: http://www.bdlive.co.za/markets/2015/11/06/jse-sharply-down-as-us-rate-hike-becomes-more-likely
