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Johannesburg - The mood on the JSE was cautiously optimistic on Friday as major indices continued the recovery that started on Thursday afternoon, when a late run enabled the market to close higher.
The reason for the improved sentiment is the latest interest rate news from the US, where expectations now are that any rise in interest rates will be much slower and lower than originally anticipated.
That should be good news for the local market, where fears that a sharp rise in US interest rates could lead to an outflow from emerging markets back to the US resulted in rising bond yields, putting pressure on share prices.
Bond yields are already softening after this week’s meeting of the Federal Reserve’s open market committee, where clear signs were given that any US interest rate hike will be a slow and controlled process.
The dollar is also on the retreat after this week’s meeting, which gave commodity prices and shares a boost.
By midday on Friday the All-share index was another 0.43% stronger at 52 124 points, and the Top 40 index gained 0.56% to 46 471 points.
The technical analysts of Imara SP Reid said in their daily Market Snapshot that the Top 40 index has built a near-term support structure just ahead of the 200-day moving average, with an improvement in short-term moving averages and momentum figures suggesting that the Top 40 shares now have an improved likelihood of moving higher.
The area between 46 800 and 47 000 points is now regarded as a realistic near-term target for the Top 40 index. The local market is also supported by improved sentiment on markets worldwide. Wall Street moved strongly on Thursday with the Nasdaq index on a new high, supported by the prospect of borrowing costs that will be lower than originally expected.
Wall Street was further boosted by more good news on the American economy. Initial jobless claims were recorded at 267 000 - substantially below an anticipated reading of 275 000. Consumer confidence was mostly in line with expectations.
Even the European markets were higher on Friday, despite the possibility that Greece will default on its IMF loans at the end of the month, which has become stronger after another round of talks broke down.
Analysts said the subdued reaction of many markets in recent weeks to the escalating crisis reflects the argument that the exposure of Europe's private sector to Greece is now minimal, and that a default or even its departure from the euro may have little effect.
The Gold index, which had a strong run on Thursday on the back of a higher gold price, was the only index which lost ground on Friday morning, trading 0.66% lower by midday. At that stage the Resources index was 0.65% higher, the Industrial index 0.55% up and the financial index had gained 0.31%.
Netcare [JSE:NTC] was among the busiest shares on Friday morning and gained 1.17% to R37.20, while Tiger Brands [JSE:TBS] traded 0.89% stronger at R277.64. Clicks [JSE:CLS] lost 1.29% to R91.29 in 606 transactions in which more than 3 million shares were sold for over R278m.
Among the heavyweights Naspers [JSE:NPN] gained 0.80% to R1 865.81 and SABMiller [JSE:SAB] 0.45% to R633.17, but Sasol [JSE:SOL] was 1.06% softer at R429.00.
