/ 17 March 2008

Fed move continues to weigh on JSE

An emergency move by the United States Federal Reserve to cut its discount rate has continued to weigh on markets, sending the JSE below the 30 000-level by midday on Monday.

The Fed’s move to cut its discount rate, its lending rate to financial institutions, to 3,25% from 3,5% to help alleviate problems in its financial system, has raised more concerns about the state of the economy, traders say.

By noon, the JSE’s broader all-share index had fallen 2,63% to 29 840,92 points. Banks tumbled 4,68% and financials slumped 4,45%. The platinum mining index gave up 2,97%, resources dipped 2,17%, but the gold mining index added 1,81%. Industrials were 2,48% weaker.

The rand was bid at 8,13 to the US dollar from 7,90 when the JSE closed on Friday, while gold was quoted at $1 024,05 a troy ounce from $1 005,35/oz at the JSE’s last close. The yellow metal hit a fresh all time high earlier of $1 032,40/oz.

One trader explained that there was a harsh sell off on overseas equity markets because of concerns about the fragile US economy, and the JSE followed the trend.

“The market has come off. European markets opened weaker after they succumbed to the pressures felt in the US and Asia, and the JSE followed suit,” one Johannesburg-based trader said.

He added that it wasn’t surprising that gold counters were doing well today as the gold price was at record levels.

Gold miner AngloGold Ashanti climbed R3,95, or 1,44%, to R278 and Gold Fields gained R3,35, or 2,54%, to R135.

The trader added that with the exception of gold stocks, the rest of the market was looking “disastrous” — with financial counters the main culprits in the sell-off.

Among banks and financials, Investec fell R4,10, or 7,61%, to R49,75, Absa decreased R5,36, or 5,34%, to R94,99 and Nedbank dipped R5,24, or 4,79%, to R104,26.

“It is gloomy all around,” said the trader. He added that a rate cut of 1% by the US Federal Reserve on Tuesday seems to be more realistic to help ease the problems in its financial system.

Resources heavyweight Anglo American declined R12,30, or 2,43%, to R493,70, BHP Billiton retreated R6,86, or 2,68%, to R249 and Sasol weakened R10,52, or 2,54%, to R403,48.

Platinum producer Anglo Platinum dipped R48,80, or 3,86%, to R1 217 and Impala Platinum gave up R8,27, or 2,51%, to R321,73.

Heavy equipment supplier Bell Equipment lost two rand, or 4,17%, to R46. It earlier reported diluted earnings per share to 384 cents for the year ended December from 249 cents a year ago.

Diversified industrial group Bidvest pulled back R4,12, or 3,73%, to R106,39, while brewer SABMiller was off R4,12, or 2,43%, to R165,44.

Luxury goods group Richemont was up 78 cents, or 1,73%, to R45,80, which, according to the trader, was higher because of the weaker rand.

Diversified education, training and placements group ADvTECH was down 15 cents, or 3,61%, to R4. It reported a 42% increase in diluted headline earnings per share to 31 cents for the year-ended December 2007, from 21,8 cents in the same period in 2006. – I-Net Bridge