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Johannesburg - Share prices on the JSE followed the markets in Europe and Asian higher on Monday morning on expectations that the European Central Bank will eventually do something to boost the sagging eurozone economies.
Most markets, except the JSE, already rallied on Friday on fresh signals that the ECB will launch a bond-buying stimulus programme this week.
Wall Street closed higher on Friday night and on Monday morning markets in Europe and Asia continued the upward movement, which was modestly followed by the JSE.
READ: Asian markets mostly up on rise in oil prices
By midday on Monday the All-share index was 0.54% higher at 48 718 while the Top 40-index gained 0.61% to 42 715. Most of the other major indices, with the exception of resources which remained unchanged, were also higher.
The chronically low level of inflation across the single currency bloc has fuelled concern that the region could slip into deflation - a sustained and widespread drop in prices. Britain, which is not part of the eurozone, also risks falling into deflation later this year.
While falling prices may sound good for consumers, deflation can trigger a vicious spiral in which businesses and households delay purchases, throttling demand and causing companies to lay off workers.
The purpose of a bond-buying programme, similar to the one that the Federal Reserve concluded recently in the United States, is to inject some desperately needed cash into the banking system with the hope that it will be used to stimulate the economy.
Europe is still South Africa’s major trading and any boost to the economy in that region will benefit South African exports. It is also expected that not all the money injected in the banking system will filter through to the real economy, but some of it will be used to chase higher yields in emerging markets, as the happened with American quantitative easing.
Some of that money could end up in the South African market.
The markets also received a boost from a rally in the oil price over the weekend after the International Energy Agency said there were signs "the tide will turn" in the market after tumbling towards six-year lows.
While it foresaw prices sliding in the short term, the Paris-based agency said it expected a potential rebalancing of the market in the second half of the year.
The rally lost some of its steam in early Asian trade on Monday, with markets expecting gloomy Chinese economic data to be published this week. Chinese new home prices dropped an average 4.3% year-on-year in 68 of the 70 major cities monitored. That was an appetiser for Tuesday's report on gross domestic product which is expected to show annual growth slowed to 7.2% last quarter, undershooting the government’s 7.5% target and the weakest in 24 years.
By midday Brent traded at $49.25.
On the JSE the oil price rally was good enough to give Sasol [JSE:SOL] a boost and the share traded 1.6% higher at R389.89. Major oil producer BHP Billiton [JSE:BIL] however lost 1.02% to R239.32.
The major copper producers, Anglo American [JSE:AGL] and Glencore [JSE:GLN], both traded lower. Copper jumped in London on Monday before paring gains as traders who scooped up the metal near last week's five-and-a-half year lows took profits. Anglo American lost 0.53% to R190.23 and Glencore was 0.64% lower at R43.65.
Among gold shares Gold Fields [JSE:GFI] and Sibanye [JSE:SGL] both reached new 53-week highs. Sibanye gained another 6.73% to R31.71 and is now 107.8% higher for the past year, with gains of 51.8% over the last 30 days. Gold Fields is now 81.7% higher over the last year and 38.9% over the last 30 days, after the share increased by another 2.91% to R68.26.
In the industrial sector the heavyweights were higher. Richemont [JSE:CFR] was 2.26% higher at R96.05, after sharp losses last week when the Swiss franc gained more than 30% in two days. SABMiller [JSE:SAB] gained 1.72% to R597.97 and Naspers [JSE:NPN] 1.34% to R1 580.87.
Most markets, except the JSE, already rallied on Friday on fresh signals that the ECB will launch a bond-buying stimulus programme this week.
Wall Street closed higher on Friday night and on Monday morning markets in Europe and Asia continued the upward movement, which was modestly followed by the JSE.
READ: Asian markets mostly up on rise in oil prices
By midday on Monday the All-share index was 0.54% higher at 48 718 while the Top 40-index gained 0.61% to 42 715. Most of the other major indices, with the exception of resources which remained unchanged, were also higher.
The chronically low level of inflation across the single currency bloc has fuelled concern that the region could slip into deflation - a sustained and widespread drop in prices. Britain, which is not part of the eurozone, also risks falling into deflation later this year.
While falling prices may sound good for consumers, deflation can trigger a vicious spiral in which businesses and households delay purchases, throttling demand and causing companies to lay off workers.
The purpose of a bond-buying programme, similar to the one that the Federal Reserve concluded recently in the United States, is to inject some desperately needed cash into the banking system with the hope that it will be used to stimulate the economy.
Europe is still South Africa’s major trading and any boost to the economy in that region will benefit South African exports. It is also expected that not all the money injected in the banking system will filter through to the real economy, but some of it will be used to chase higher yields in emerging markets, as the happened with American quantitative easing.
Some of that money could end up in the South African market.
The markets also received a boost from a rally in the oil price over the weekend after the International Energy Agency said there were signs "the tide will turn" in the market after tumbling towards six-year lows.
While it foresaw prices sliding in the short term, the Paris-based agency said it expected a potential rebalancing of the market in the second half of the year.
The rally lost some of its steam in early Asian trade on Monday, with markets expecting gloomy Chinese economic data to be published this week. Chinese new home prices dropped an average 4.3% year-on-year in 68 of the 70 major cities monitored. That was an appetiser for Tuesday's report on gross domestic product which is expected to show annual growth slowed to 7.2% last quarter, undershooting the government’s 7.5% target and the weakest in 24 years.
By midday Brent traded at $49.25.
On the JSE the oil price rally was good enough to give Sasol [JSE:SOL] a boost and the share traded 1.6% higher at R389.89. Major oil producer BHP Billiton [JSE:BIL] however lost 1.02% to R239.32.
The major copper producers, Anglo American [JSE:AGL] and Glencore [JSE:GLN], both traded lower. Copper jumped in London on Monday before paring gains as traders who scooped up the metal near last week's five-and-a-half year lows took profits. Anglo American lost 0.53% to R190.23 and Glencore was 0.64% lower at R43.65.
Among gold shares Gold Fields [JSE:GFI] and Sibanye [JSE:SGL] both reached new 53-week highs. Sibanye gained another 6.73% to R31.71 and is now 107.8% higher for the past year, with gains of 51.8% over the last 30 days. Gold Fields is now 81.7% higher over the last year and 38.9% over the last 30 days, after the share increased by another 2.91% to R68.26.
In the industrial sector the heavyweights were higher. Richemont [JSE:CFR] was 2.26% higher at R96.05, after sharp losses last week when the Swiss franc gained more than 30% in two days. SABMiller [JSE:SAB] gained 1.72% to R597.97 and Naspers [JSE:NPN] 1.34% to R1 580.87.
