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Johannesburg - Industrial shares on Monday morning continued the rebound that started on Friday, but the mood in the resources sector is still down. Analysts warn that the exceptionally negative sentiment could undermine further improvements, even if the JSE is oversold.
The positive sentiment in the industrial sector was however strong enough to push the All-share and Top 40 indices higher by Monday midday.
The Industrial index improved by 1.73% on Friday to above 58 000 due to brisk volumes at the lower levels and on Monday morning continued this trend, adding gaining another 0.78% to 58 484 points.
This enabled the All-share index to rise by 0.21% to 48 716 while the Top 40 index gained 0.28% to 43 505.
But the Financial index lost 0.32% while the resources sector was another 0.46% lower. With the beleaguered gold price - a victim of the strong dollar - now sitting at under $1 200 per ounce, the Gold index gave up another 2.72%.
The technical analysts of Imara SP Reid said in their daily Market Snapshot on Monday morning that the exceptionally negative trend for the resources sector remains in place in spite of its 'most oversold position in many years’.
There is no sign of any improvement in the negative momentum indicators of the resources sector, which are not restricted to South Africa. Australian resources are also performing poorly, and dropped further on Monday morning.
The negativity stems among others from weak commodity prices forced down by the strong dollar, which is going from strength to strength.
The dollar received another boost on Friday from strong jobs data in the United States. More than 240 000 jobs were created in September, pushing the jobless rate as low as 5.9%.
Any positive news on the US economy is an indication that interest rates might rise sooner rather than later.
The good job figures also gave Wall Street a boost and the Dow Jones index increased by more than 1%.
The positive news out of the US did however improve the outlook for industrial shares and Imara SP Reid said it is significant that the index recovered to above 58 000. Overhead resistance is visible at just beyond 59 400 points.
The Top 40 index also remained oversold, which encourages a degree of bargain hunting. The 44 280 level is now a near-term target for the Top 40 index.
The JSE took the appointment of former director general of the National Treasury Lesetja Kganyago as the new president of the South African Reserve Bank in its stride. It was also broadly welcomed by economists.
Read: As it happened: Kganyago is new Sarb governor
The Industrial index received a big boost from Naspers [JSE:NPN], one of the heavyweights in the sector, which improved by 2.66% to R1 290.46.
Naspers received a boost from Chinese internet giant Tencent, which improved by 3.2% in Hong Kong when that market posted its biggest daily gain in more than a month. Pro-democracy activists in Hong Kong scaled down protests and upbeat US jobs data provided some relief for the global economic outlook. Naspers owns 34.4% of Tencent.
Anglo American [JSE:AGL], which lost 8% last week, recovered by 0.88% to R238.87.
In the gold sector Harmony Gold [JSE:HAR] lost another 3.15% to trade at R22.74. This share has now lost 26% over the last month.
- Fin24
