Global jitters over US debt vote hits JSE

The JSE tracked weaker global markets on Wednesday as investors awaited the outcome of a vote on the US debt limit deal days before what could be a catastrophic default.

The deal, reached at the weekend by President Joe Biden and House speaker Kevin McCarthy, cleared an important hurdle on Tuesday, Bloomberg reported.

Legislation to suspend the borrowing ceiling for a period and cap federal spending was advanced by the House rules committee on a 7-6 margin, sending it to a vote on final passage by the full House of Representatives.

The vote is expected to take place at about 2.30am SA time on Thursday.

“McCarthy [a Republican] is facing loud resistance from a group of ultraconservatives in his party, meaning he’ll have to depend a great deal on Democrats to get the bill to the Senate,” said FXTM senior research analyst Lukman Otunuga.

“There, Democrats have a slight majority. Time is running out, though. The treasury department has warned it could run out of money on Monday, just five days away.”

The JSE all share fell 1.15% to 75,067.47 points led by a weaker industrials, food producers, and industrial metals. The top 40 ended the day 1.3% weaker. Still, precious metals rose 3.11% and retailers added 1.34%, while banks gained 0,8%, resources 0,67%, and financials 0.39%.

The all share is down 4.03% for the month, with food producers and retailers posting the worst performances: food producers down 15.27% and retailers 11.89%.

At 6.39pm, the Dow Jones industrial average was 0.76% weaker at 32,792.56 points, and the S&P 500 was down 0.83%. In Europe, London’s FTSE 100 closed 1.01% lower, while

France’s CAC 40 and Germany’s DAX were both down 1.54%.

The rand, which has lost more than 16% of its value against the dollar so far this year, remained under pressure and analysts said the unit could weaken to weaken to R20/$.

At 6pm, the rand had depreciated 0.49% to R19.7803/$ and 0.32% to R24.5199/£, though it had strengthened 0.23% to R21.0724/€. The euro was 0.75% weaker at $1.0652.

“The rand is dealing with a plethora of challenges domestically, ranging from the recent greylisting, the enormous burden of state-owned entities on the fiscus, an increased vulnerability in diplomatic ties, fragile economic growth and an escalating power crisis,” said IG senior market analyst Shaun Murison.

Gold gained 0.49% to $1,968.67/oz, but platinum weakened 1.51% to $998.70/oz. Brent crude was 0.65% weaker at $73.32 a barrel.