JSE slides as oil surges and Gold Fields takeover bid falters

The JSE’s Top 40 index fell about 1.7% in early trade on Monday as Gold Fields shares plunged more than 12% at the open following the rejection of its proposed takeover of Australia’s Northern Star Resources, while oil prices surged amid renewed uncertainty over the US-Iran conflict.

The rand also weakened, adding to pressure on South African markets as investors assessed the implications of higher energy prices and the prospect of further interest-rate increases globally.

Gold Fields’ shares fell sharply after Northern Star rejected an unsolicited A$38.7 billion takeover proposal. The offer, received on 14 September, comprised 0.3125 new Gold Fields shares and A$7.25 in cash for each Northern Star share. It initially implied a value of A$27 a share, but that had fallen to about A$25.19 by Friday as Gold Fields’ share price declined.

Northern Star’s board rejected the proposal, saying it materially undervalued the company. Chairman Michael Chaney said the offer did not reflect the company’s fundamental value. Gold Fields has indicated that it remains open to discussions.

Northern Star shares rose after the rejection, while the company remains under pressure from activist investor Elliott Investment Management, which has been pushing for strategic changes.

The rand was about 0.5% weaker at around R16.40 to the dollar in early trading, while the yield on the benchmark 2035 government bond rose to about 8.855%. Reuters reported that higher oil prices and the continuing US-Iran standoff were weighing on the currency.

The JSE All Share Index closed 0.66% lower at 110,826 on Friday, while the Top 40 fell 0.65% to 103,152. The All Share was about 5% lower over the previous month.

South African motorists are also facing the prospect of another sharp fuel-price increase in October. Central Energy Fund data showed petrol 95 under-recovery approaching R3 a litre late last week, with the projected inland pump price nearing R30 a litre if current conditions persist. BusinessTech's latest CEF-based estimate put the petrol 95 under-recovery at R3.01 a litre.

Oil back above $100

Brent crude rose by about 2.8% to around $107.26 a barrel in early trading, while US West Texas Intermediate gained about 1.8% to $94.07.

The latest move followed renewed uncertainty over diplomatic efforts between Washington and Tehran. Oil markets have been particularly sensitive to the situation because of disruption to shipping through the Strait of Hormuz. Reuters reported that Brent climbed by as much as 3% on Monday as doubts over a US-Iran truce increased.

The renewed oil surge comes after prices fell sharply last week when hopes of a diplomatic breakthrough increased. The market is now weighing the prospect of prolonged disruption to energy supplies against attempts to reopen the Strait.

For South Africa, sustained oil prices above $100 a barrel pose an additional inflation risk and could put further pressure on household and business costs.

Wall Street and global markets

US markets closed higher on Friday, with the Dow Jones Industrial Average gaining 0.93% to 51,828.62. The S&P 500 rose 0.51% to 7,743.41, while the Nasdaq gained 0.48% to 27,068.72.

US equity futures were weaker in late Sunday trading, with S&P 500 futures down about 0.33% and Nasdaq-100 futures off 0.60%.

Asian markets were mixed on Monday. Seoul fell sharply on its reopening after a holiday, while Tokyo and Shanghai also traded lower. Hong Kong, Sydney and Singapore moved higher.

European markets opened mostly higher, although investors remained focused on oil prices, inflation and the direction of central-bank policy.

US Treasury yields remained elevated, with the 10-year yield around 5.20% and the 30-year yield around 5.51%, according to market data cited in Monday’s reports.

Inflation and interest rates in focus

Investors are heading into a busy week for US economic data.

The Federal Reserve’s preferred inflation measure, the personal consumption expenditures price index, is due on Wednesday, 30 September. The September employment report follows on Friday, 2 October.

The data will be closely watched after the Federal Reserve raised its benchmark interest-rate target by 25 basis points to a range of 3.75% to 4%, with officials signalling that another increase could be required if inflation remains persistent.

Higher oil prices have complicated the inflation outlook by increasing the cost of fuel, transport and other goods and services. For South Africa, the combination of higher crude prices and a weaker rand could feed directly into the country’s October fuel-price adjustment and broader inflation expectations.

Markets at a glance

• JSE Top 40: down about 1.7% in early Monday trade.

• Rand: about R16.40/$, down roughly 0.5%.

• Brent crude: about $107.26 a barrel.

• WTI: about $94.07 a barrel.

• Gold Fields: down more than 12% at the JSE open.

• Northern Star: takeover proposal worth A$38.7bn rejected.

• October petrol: projected to approach R30 a litre if current CEF recoveries persist.

• US PCE inflation: due Wednesday.

• US September jobs report: due Friday.