ALAN FINLAY, Johannesburg | Wednesday 4.00pm.
LOCAL markets and gold were hammered on Wednesday after a fifty basis point interest rates hike to 6,5% in the US produced a demand for dollars and dampened local counters.
Analysts said the negative sentiment was surprising, after the Dow Jones responded positively to the hike. The US Federal Reserve has indicated that a further hike, aimed at slowing down inflation, is possible.
While the JSE overall finished 1,29% or 97 points down, gold was driven through the psychological support of $275 and at 4pm was trading at $273,25 to the ounce. Gold shares on the local bourse followed the international price downwards, closing 2,61% or 25 points weaker.
Dealers said the demand for dollars weakened the currencies of gold-producing countries, and put pressure on bullion.
Resources on the JSE notched up some of the biggest losses of the day, the counter ending 2,06% or 102 points down. Industrials closed play 1,36% or 116 points weaker, while financials finished 0,30% or 28 points in the red.
By 4pm the rand was trading slightly weaker at R7,09 to the dollar and R10,60 to the pound.
Analysts cautioned that increased pressure on the currency may result in an interest rates hike when the Reserve Bank’s Monetary Policy Committee meets on Thursday.
Both Asian and European bourses were dampened by the rates hike. The Nikkei closed 0,84% or 147 points down, while the Hang-Seng finished 2,19% or 332 points weaker. At 4pm London’s FTSE 100 was 1,71% or 108 points lower. At the same time the Dow Jones was trading down 0,99% or 108 points.