UPDATE 1-South African rand and equities weaken on U.S.-China trade fears

Published: 2019-05-06 tag: financials

* Rand weakens as U.S.-China trade dispute weighs

* Equities retreat as tariffs threaten emerging markets (Adds latest data, trader comment, stocks)

JOHANNESBURG, May 6 (Reuters) - The South African rand weakened on Monday as the country heads for national elections on Wednesday while worries over the trade war between the United States and China curbed emerging market currencies and shares.

The rand declined by 1.05 percent to 14.4950 against the dollar by 1500 GMT, having closed on Friday at 14.3450 after a moderate U.S. jobs report.

Markets were hit by U.S. President Donald Trump’s announcement on Sunday that he would raise tariffs this week on $200 billion worth of Chinese goods.

“Trump has threatened to increase tariffs on Chinese exports, which has led to an [emerging markets] currency sell-off overnight,” said fixed income analyst at Rand Merchant Bank Michelle Wohlberg in a note.

South Africans, meanwhile, are preparing to head to the polls on Wednesday in what is expected to be the country’s most competitive elections since the end of apartheid. While victory looks assured for the ruling African National Congress, its majority is expected to decline.

Share trade volumes were relatively thin as investors await results from the elections, Wohlberg said.

In bonds, the government yield on benchmark paper due in 2026 was up 2 basis points at 8.580 percent.

The blue-chip Top-40 share index, meanwhile, shed 1.31 percent to 52,336 points while the broader All-Share index was down a shade more than 1 percent at 58,713 points.

Banking stocks fell 1.5 percent, with Absa down 2.6 percent at 168.50 rand and Standard Bank dropping 2.1 percent to 202.48 rand.

“The markets have been looking for the trade war between America and China to be resolved amicably, and that has not happened,” said Garry McNamara, portfolio manager at Sanlam Private Wealth.

“I think the market has built a bit of that into gains over the last week or month - and that certainly came to an end today.”

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