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Global economy fears stop JSE rebound

Johannesburg - Renewed fears about the world’s economy, and particularly the Chinese economy, stopped the rebound on the JSE on Wednesday morning.

At one stage the major indices were about 0.70% weaker than on Tuesday, but consolidation started just before midday, indicating that there is still some technical support for the beleaguered market which is regarded by many as being oversold.

The All-share index at midday was 0.38% lower at 47 507 and the Top 40 index lost 0.35%, which meant that half of the morning’s losses were recovered.

But sentiment was definitely not as buoyant as on Tuesday, when a slightly weaker dollar and increased trading in commodities gave investors hope that the worst for the commodity market was over.

The mood was spoilt on Wednesday by news that inflation in China eased to 1.6% - its lowest since January 2010 - from 2.0% in August, indicating deflationary risks are rising in the world's number two economy.

The government also said the producer price index (PPI) - a measure of costs for goods at the factory gate and a leading indicator of the trend for the consumer price index - fell 1.8% year-on-year. The last PPI increase was in January 2012, when it rose 0.7%.  

An inflation dip is often regarded as an indication of lower demand in the economy, which normally leads to lower growth.

The dollar also strengthened against the euro and the yen which will renew pressure on commodity prices, with oil touching levels of only $80 per barrel.

It was therefore no surprise that the Resources and Gold indices were again the biggest losers on Wednesday morning. The Resources index was 1% weaker while the volatile Gold index lost 1.38%.

The Industrial index was trading virtually unchanged (-0.07%) and the Financial index was 0.33% weaker.

The next few days will be crucial in deciding which way the market will go. Imara SP Reid said in its daily Market Snapshot that the Top 40 index comfortably breached the resistance level of 41 800 on Tuesday and if it can remain above that level, the next level to be tested can be 43 200.

The Industrial index is also approaching its 200-day moving average and Imara SP Reid expects it to trade above that level soon, but it is questionable if it can breach that important resistance level soon. By midday it was trading at 56 343.

Among the resources shares the two top iron ore producers, Assore [JSE:ASR] and Kumba Iron Ore [JSE:KIO], which lost more than 40% of their value over the last year, have given up some of the strong gains of the last few days.

Assore dropped 4.63% to R238.50, but is still more than 16% higher for the last seven days. Over the year it lost 41.6%. Kumba traded 1.03% lower at R286.03 and is now 3.3% higher for the week and 38.2% weaker for the year.

BHP Billiton [JSE:BIL], which produces iron ore for the Chinese market in Australia, lost another 0.66% to R295.55 and is now more than 20% lower than its 52-week high in July. Anglo American [JSE:AGL], which has also lost more than 20% over the last few months, was 0.75% weaker at R248.60.

At midday on Wednesday Naspers [JSE:NPN] was at R1 203.40 after opening almost 3% higher at R1 234.99. At midday it was only 0.25% stronger than on Tuesday.

 - Fin24

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Rand - Dollar
18.96
-0.3%
Rand - Pound
23.95
-0.2%
Rand - Euro
20.47
-0.0%
Rand - Aus dollar
12.36
-0.1%
Rand - Yen
0.13
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Platinum
911.00
+1.6%
Palladium
1,012.02
+1.0%
Gold
2,213.44
+0.9%
Silver
24.79
+0.6%
Brent Crude
86.09
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Top 40
68,346
+1.0%
All Share
74,536
+0.9%
Resource 10
57,251
+2.9%
Industrial 25
103,936
+0.6%
Financial 15
16,502
-0.1%
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