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Johannesburg - The JSE received a welcome boost on Wednesday morning with the news that inflation dropped dramatically last month.
READ: Petrol and food prices drive CPI down to 5.3%
The market edged higher for the third day in a row on expectations that the European Central Bank will announce stimulatory measures for the eurozone soon, and now it seems that good news could be in store for South Africans too.
The news that the inflation rate dropped last month with a half a percentage point to only 5.3% made an end to any possibility that interest rates in South Africa will have to be hiked soon to curtail inflation.
Instead, more analysts now think that lower inflation will give the Reserve Bank room to lower interest rates even more to try and stimulate the South African economy.
By midday the All-share index was already 0.79% higher at 49 512 points while the Top 40-index increased by 0.74% to 43 393 points.
Although next week’s meeting of the Reserve Bank’s monetary policy committee is probably too early to expect such drastic action, the press release after the meeting might give an indication of what committee members are thinking.
Lower interest rates in South Africa will be bad for the rand as this narrows the interest rate differential with developed markets, but as long as rates stay low in Europe, Japan and the United States the difference will still be big enough to encourage investors chasing higher returns to look at South African bonds and shares.
If the ECB's anticipated bond buyback programme becomes a reality, some of the money injected into the European banking system will surely find its way to emerging markets like South Africa.
Most of the heavyweights in the Industrial index traded higher on Wednesday morning which helped the index improve 1.35% by midday. Naspers [JSE:NPN] gained 3.45% to R1 636.96 and is now only about R5 below its all-time high. SABMiller [JSE:SAB] was 1.32% stronger at R599.75 and Richemont [JSE:CFR] was 1.07% stronger at R98.99.
The Resources sector started the day much stronger, but lost ground steadily over the morning and by midday on Wednesday it was 0.04% lower.
Production reports by two of the biggest iron producers, Rio Tinto and BHP Billiton [JSE:BIL], which were released in Australia on Wednesday morning, indicated that these two companies are still increasing output in an already oversupplied market. That means prices will remain depressed for a while longer.
BHP Billiton was initially more than 2% stronger at R248.62, but by midday traded at R244.85, only 0.19% higher.
The gold price touched the $1 230 per ounce level at one stage and the Gold index improved by 2.09%. Harmony [JSE:HAR] gained 1.87% to R35.50 and Gold Fields [JSE:GFI] was 0.95% higher at a new 52 week-high of R67.74.
READ: Petrol and food prices drive CPI down to 5.3%
The market edged higher for the third day in a row on expectations that the European Central Bank will announce stimulatory measures for the eurozone soon, and now it seems that good news could be in store for South Africans too.
The news that the inflation rate dropped last month with a half a percentage point to only 5.3% made an end to any possibility that interest rates in South Africa will have to be hiked soon to curtail inflation.
Instead, more analysts now think that lower inflation will give the Reserve Bank room to lower interest rates even more to try and stimulate the South African economy.
By midday the All-share index was already 0.79% higher at 49 512 points while the Top 40-index increased by 0.74% to 43 393 points.
Although next week’s meeting of the Reserve Bank’s monetary policy committee is probably too early to expect such drastic action, the press release after the meeting might give an indication of what committee members are thinking.
Lower interest rates in South Africa will be bad for the rand as this narrows the interest rate differential with developed markets, but as long as rates stay low in Europe, Japan and the United States the difference will still be big enough to encourage investors chasing higher returns to look at South African bonds and shares.
If the ECB's anticipated bond buyback programme becomes a reality, some of the money injected into the European banking system will surely find its way to emerging markets like South Africa.
Most of the heavyweights in the Industrial index traded higher on Wednesday morning which helped the index improve 1.35% by midday. Naspers [JSE:NPN] gained 3.45% to R1 636.96 and is now only about R5 below its all-time high. SABMiller [JSE:SAB] was 1.32% stronger at R599.75 and Richemont [JSE:CFR] was 1.07% stronger at R98.99.
The Resources sector started the day much stronger, but lost ground steadily over the morning and by midday on Wednesday it was 0.04% lower.
Production reports by two of the biggest iron producers, Rio Tinto and BHP Billiton [JSE:BIL], which were released in Australia on Wednesday morning, indicated that these two companies are still increasing output in an already oversupplied market. That means prices will remain depressed for a while longer.
BHP Billiton was initially more than 2% stronger at R248.62, but by midday traded at R244.85, only 0.19% higher.
The gold price touched the $1 230 per ounce level at one stage and the Gold index improved by 2.09%. Harmony [JSE:HAR] gained 1.87% to R35.50 and Gold Fields [JSE:GFI] was 0.95% higher at a new 52 week-high of R67.74.
