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Johannesburg - Share prices on the JSE were marginally higher on Monday morning, but it seems investors are becoming more cautious about the market’s ability to maintain current record levels.
By midday on Monday the All-share index was only 0.10% stronger at 52 112 points, while the Top 40 index only improved by 0.09% to 47 123 points. The market, which closed on a new record on Friday, opened sharply lower on Monday morning, before shares prices started to recover again.
The current record levels are due to euphoria on the remarkably strong US jobs data announced last week, which pushed the Dow Jones index on Wall Street past 17 000, but investors are now increasingly concerned about what the Federal Reserve’s reaction will be to the stronger than expected data.
Interest rate hikes earlier than expected will stop the market in its tracks, particularly developing markets reliant on inflows from investors from developed markets seeking higher yields.
The market's next focus will also be whether the fast-approaching earnings season in the US can justify stocks climbing further into record territory.
Many factors point to second-quarter earnings in the US poised to surprise substantially to the upside.
There is a slight chance that profits for S&P 500 companies could return to double-digit growth for the first time in nearly three years.
Resources stocks were the star performers on the JSE last week, with Anglo American [JSE:AGL] gaining 8% during the week and BHP Billiton [JSE:BIL] 7% to reach a new record, but by Monday midday the resources index was 0.02% lower.
The star performer on Monday morning was Glencore [JSE:GLN], which reached a new 52-week intraday high of R64.00 at one stage before falling back to R63.13, 0.11% weaker than Friday.
Glencore’s share price is influenced by its exposure to copper. Some fund managers are increasing their exposure to copper mining companies, betting the industry has reached the bottom of a downturn and that shares offer value for money.
Copper has lost almost a third of its value from a peak in 2011 due to a slowdown in top metals consumer China, which buys about 40% of global output, which had a devastating effect on the share prices of copper producers.
BHP Billiton, which reached a new 52-week high on Friday, lost some ground and traded 0.04% lower at R368.77, but Anglo American improved by 0.08% to R280.70.
Much also depends on what will happen to the rand, as a weaker currency is not only good for resources companies earning their income in the unit, but also for some of the big double-listed groups which do most of their business outside South Africa.
The rand, which traded at R10.80 to the dollar on Monday morning, is under pressure from a rampant dollar, which was on its strongest run since late October on Monday as the momentum of last week's stellar US jobs data carried markets forward.
After Thursday's strong US employment report, some economists have begun talking up prospects for a 4.0% annual growth rate in gross domestic product for the April-June period, a dramatic snap back from the first quarter's contraction of 2.9%.
A share that benefits from the weaker rand is Naspers [JSE:NPN], which reached a new intraday high of R1 354.94 on Monday morning before losing ground again. By midday the share price was 0.09% stronger at R1 348.21.
Naspers had its record close of R1 354.09 on March 11, but since then the share price lost almost 27% in a massive correction to fall below R1 000 a share. These losses are now recovered and it seems the share price is on a record-breaking path again.
- Fin24
By midday on Monday the All-share index was only 0.10% stronger at 52 112 points, while the Top 40 index only improved by 0.09% to 47 123 points. The market, which closed on a new record on Friday, opened sharply lower on Monday morning, before shares prices started to recover again.
The current record levels are due to euphoria on the remarkably strong US jobs data announced last week, which pushed the Dow Jones index on Wall Street past 17 000, but investors are now increasingly concerned about what the Federal Reserve’s reaction will be to the stronger than expected data.
Interest rate hikes earlier than expected will stop the market in its tracks, particularly developing markets reliant on inflows from investors from developed markets seeking higher yields.
The market's next focus will also be whether the fast-approaching earnings season in the US can justify stocks climbing further into record territory.
Many factors point to second-quarter earnings in the US poised to surprise substantially to the upside.
There is a slight chance that profits for S&P 500 companies could return to double-digit growth for the first time in nearly three years.
Resources stocks were the star performers on the JSE last week, with Anglo American [JSE:AGL] gaining 8% during the week and BHP Billiton [JSE:BIL] 7% to reach a new record, but by Monday midday the resources index was 0.02% lower.
The star performer on Monday morning was Glencore [JSE:GLN], which reached a new 52-week intraday high of R64.00 at one stage before falling back to R63.13, 0.11% weaker than Friday.
Glencore’s share price is influenced by its exposure to copper. Some fund managers are increasing their exposure to copper mining companies, betting the industry has reached the bottom of a downturn and that shares offer value for money.
Copper has lost almost a third of its value from a peak in 2011 due to a slowdown in top metals consumer China, which buys about 40% of global output, which had a devastating effect on the share prices of copper producers.
BHP Billiton, which reached a new 52-week high on Friday, lost some ground and traded 0.04% lower at R368.77, but Anglo American improved by 0.08% to R280.70.
Much also depends on what will happen to the rand, as a weaker currency is not only good for resources companies earning their income in the unit, but also for some of the big double-listed groups which do most of their business outside South Africa.
The rand, which traded at R10.80 to the dollar on Monday morning, is under pressure from a rampant dollar, which was on its strongest run since late October on Monday as the momentum of last week's stellar US jobs data carried markets forward.
After Thursday's strong US employment report, some economists have begun talking up prospects for a 4.0% annual growth rate in gross domestic product for the April-June period, a dramatic snap back from the first quarter's contraction of 2.9%.
A share that benefits from the weaker rand is Naspers [JSE:NPN], which reached a new intraday high of R1 354.94 on Monday morning before losing ground again. By midday the share price was 0.09% stronger at R1 348.21.
Naspers had its record close of R1 354.09 on March 11, but since then the share price lost almost 27% in a massive correction to fall below R1 000 a share. These losses are now recovered and it seems the share price is on a record-breaking path again.
- Fin24
