South Africa's rand, stocks fall as risk sentiment wanes

JOHANNESBURG (Reuters) – South Africa’s rand and stocks weakened on Tuesday as concerns over the upcoming U.S.-China trade talks and escalating tensions between London and Brussels sparked a flight to safety, denting appetite for riskier but high-yielding assets.

Visitors walk past a reception with an electronic board displaying movements in major indices at the Johannesburg Stock Exchange building in Sandton, Johannesburg, South Africa, August 22, 2019. REUTERS/Siphiwe Sibeko

At 1527 GMT the rand was 0.66% weaker at 15.2900 per dollar.

“An optimistic move by the rand to test the R15.00/$ mark was short-lived as renewed risk-off sentiment filtered into markets yesterday, with trade tension once again taking centre stage,” Bianca Botes, treasury partner at Peregrine Treasury Solutions, said in a note.

Top-level trade discussions between the United States and China are scheduled for Oct. 10-11, with reports that the Trump administration was moving ahead with discussions on curbing capital flows into China keeping investors on edge.

Washington also blacklisted eight Chinese tech companies, while U.S. President Donald Trump suggested a deal to end the trade dispute may not yet be quite in the offing.

Elsewhere reports that Brexit talks between Britain and Brussels were close to breaking down added further uncertainty.

Investors are also awaiting the minutes from the U.S. Federal Open Market Committee’s September meeting on Wednesday for clues on whether the central bank will cut rates at its October session.

“The rand could well claw its way back to R15.00, and below, should risk sentiment improve and expectations of a Fed rate cut towards the end of the month prevail,” Botes said.

On the bourse, the benchmark Top-40 index fell 0.35% to 48,465 points, while the All-Share index dropped 0.48% to 54,454 points.

“It’s a whole lot of noise-making, one big melting pot of uncertainty, and markets don’t like that,” said Ryan Woods, a trader at Independent Securities. “That is why you are seeing this progressive sell-off across the board.”

Among the fallers on the Top-40 index, Absa slid 2.20% to 149.00 rand and Shoprite weakened 1.81% to 124.97 rand.

Curbing further losses were gold shares, which rose 1.82% as global uncertainty sparked a flight to safe-haven assets.

Harmony Gold rose 2.7% 48.35 rand, Gold Fields gained 1.86% to 83.84 rand and AngloGold Ashanti closed up 1.47% at 315.55 rand.

In fixed income, the yield on the benchmark government bond due in 2026 added 6.5 basis points to 8.28%.

Reporting by Olivia Kumwenda-Mtambo and Tanisha Heiberg; Editing by Jan Harvey

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