US treasury yields up, JSE down

Miners and retailers pulled the JSE lower on Tuesday, with global markets weaker as rising US treasury yields keep weighing on stock markets.

The 10-year treasury reached its highest level since August 15 2007 after the release of the August “Job Openings and Labor Turnover Survey”, which signalled the jobs market is still tight, Bloomberg reported.

The benchmark yield has surged in the past month as traders assessed the possibility of tighter Federal Reserve (Fed) rates for longer. Higher yields pull investment away from stocks and other investments while also making borrowing more expensive for companies and households, which can hurt corporate profits.

The Fed has raised interest rates to the highest level since 2001 and indicated in September that it may keep the rate higher in 2024 than it had earlier expected.

“Stocks tumbled when treasury yields surged after a hot report signalled the labour market is not breaking,” said Oanda senior market analyst Edward Moya.

“A cooling labour market was expected, but the August job openings data showed a large pickup with vacancies. Unless the nonfarm payroll report [due on Friday] comes in lower than expected, markets will likely start to fully price in at least one more Fed rate hike before the end of the year,” Moya added.

The JSE all share lost 0.65% to 70,773 points and the top 40 0.56%. Banks added 0.94% and financials 0.89%. Industrial metals fell 1.92%, resources 1.85%, retailers 1.5%, precious metals 0.91%, industrials 0.91%, food producers 0.51% and listed property 0.29%.

At 6pm on Tuesday, the Dow Jones industrial average had fallen 1.25% to 33,015 points, while in Europe the FTSE 100 lost 0.54%, France’s CAC 40 1.01% and Germany’s DAX 1.06%.

The rand remained under pressure, extending the previous session’s losses as the stronger dollar and risk aversion weighed on emerging market currencies.

“The rand is not being helped by declining commodity prices either, and we could see further weakness in the short term,” said TreasuryOne currency strategist André Cilliers.

At 5.38pm, the rand had weakened 0.9% to R19.3659/$, having reached an intraday worst of R19.381. It had weakened 0.71% to R20.246/€ and 0.86% to R23.3685/£. The euro was 0.24% weaker at $1.0452.

Gold lost 0.2% to $1,824.2/oz and platinum 0.4% to $873.5/oz.

Brent crude was 0.96% firmer at $91.27 a barrel.