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Business data boosts JSE industrials

Johannesburg - After the recent technical recoveries from oversold positions, the attention of world markets - including the JSE - has swung firmly back to poor global economic prospects.

Commodity prices, including oil, are still falling and it put the spotlight back on the global economy with Wall Street leading the markets down.

By midday on Wednesday the All-share index on the JSE was 0.7% down at 49 704, while the Top 40 index was 0.24% weaker at 44 347.

The Industrial index edged 0.30% higher, but profit taking continued in the overbought financial sector and the Financial index was 0.69% lower.

Resources were again the biggest losers, with the Resources index down 1.06 while the volatile Gold index lost 3.45%.

The double headwind of slightly weaker global growth and brisk support for the US dollar (which serves as the primary pricing currency) continues to undermine commodity prices.

Oil prices plunged on Tuesday, with Brent hitting a four-year low after Saudi Arabia slashed its export prices for the US market to counter demand for shale fuels.

READ: Oil prices slump on Saudi price cuts

Brent North Sea crude for delivery in December slumped $2.38 to stand at $82.40 a barrel in London midday deals. It earlier hit a four-year low point at $82.02.

The gold price slumped to a new four-year low as it dropped for the fifth consecutive day and mining groups are now warning that job losses might occur if the current slump continues.

READ: Harmony may cut jobs as gold slumps

Iron ore prices are now at the lowest level since 2009 due to oversupply and weaker demand in China.

The JSE took its lead from Wall Street, which was hammered by other disappointing economic data too. New orders for US manufactured goods dropped $2.8bn, or 0.6%, to $499.4bn in September, the Commerce Department reported. The US trade deficit widened in September to $43.0bn as exports slowed and imports remained flat from the previous month.

Among the resources stocks Sasol [JSE:SOL], whose profits are directly linked to the oil price, lost another 2.05% to R31.89 after dropping more than 3% on Tuesday. The share is now 11.9% lower than a month ago.

In the iron ore sector the bloodbath continued. Assore [JSE:ASR] is now 48.6% lower for the last six months as the share price dropped another 2.95% to R205.39.

It is now fast approaching the 52-week low of R201.37 set last month before the technical recovery of the last few weeks. Kumba Iron Ore [JSE:KIO] dropped 0.75% to R279.25 and Exxaro is at a new 52-week low of R113.17.

Harmony [JSE:HAR] defied the odds on Wednesday morning by gaining 3% to R18.90, despite a further quarterly loss of R226m. The loss was however 78% lower than the previous quarter as production rose by 6%.

The company did however warn that it might have to cut jobs if the slump in the gold price continues.

Industrial shares were boosted by the news that South African business activity expanded at the fastest pace in 22 months in October as output and new orders grew substantially, according to the HSBC Purchasing Managers' Index.

READ: Business grows at fastest rate in 22 months

HSBC said stronger demand from African countries saw new export orders rise in October, while overall demand meant companies continued to increase staff numbers.

 - Fin24
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