Johannesburg - JSE investors got cold feet on Wednesday as the All-share index in early trade once again broke through the 52 00 barrier, only to fall below that level.
By midday the All-share index was again below 52 000 points and only 0.03% lower than Tuesday at 51 924 points, while the Top 40 index also traded 0.03% lower at 46 774 points.
The market definitely lacked direction on Wednesday and the All-share index was quite volatile in a range of about 200 points or 0.35%.
It is now the third time in about two weeks that an onslaught by the All-share index to break decisively through the 52 00 points level has lost steam at the last moment.
Some analysts think investors are becoming nervous about share valuations at these levels, particularly as South Africa's economic prospects continue to deteriorate and the possibility of further interest rate hikes seem stronger now than a while ago.
This could negatively affect the results of companies which are already trading at high price to earnings ratios.
The technical research team of Imara SP Reid, however, said in its daily market snapshot that the market’s momentum is still upward. The two major indices are building strong support levels and Tuesday’s strong run was mainly due to a rebound from these levels.
The market was waiting for the latest inflation news to see what will happen with interest rates, but the figures were better than expected.
South Africa's headline consumer inflation was steady at 6.6% year-on-year in June compared with May, Statistics SA said on Wednesday, against market expectations that it would quicken to 6.7%.
On a month-on-month basis, CPI came in slightly higher at 0.3% in June from 0.2% previously.
Core inflation, which excludes the prices of food, non-alcoholic beverages, petrol and energy, edged higher to 5.6% from 5.5%.
The news from overseas markets is also mostly positive, with Wall Street strengthening due to solid company results. These better-than-expected results are achieved through a combination of demand growth, cost cutting, and/or share repurchase activity.
Still, several members of the blue chip index reported results that disappointed analysts. McDonald's and Coca-Cola, which depend on the consumer market, reported results that did not meet market expectations, due to suppressed sales in Europe and the US.
This indicated that the US economy is not completely out of the woods yet.
The market was also influenced by the strong rand, which traded at R10.51 to the dollar (the strongest in a month) by midday on Wednesday.
Some of the big double-listed shares, which are mostly in the industrial and resources sectors, earn most of their income abroad and their results are influenced by fluctuations in the rand.
By midday on Wednesday the industrial index was only 0.23% lower than Tuesday. Imara SP Reid said the past month's trading action has seen the sector mostly consolidate.
The overall trend for industrials, however, retains it bullish bias.
The major shares in the sector were mostly marginally lower. Naspers traded only 0.12% lower on R1 297.78 and SABMiller lost 0.96% to R609.62. Richemont was 0.29% lower on R370.99.
The resources sector, which added 1.82% on Tuesday, was only 0.17% higher and is still above 60 000.
Anglo American, which set a new 52 week high of R287.21 on Tuesday, gave up 0.5% to trade at R285.75. BHP Billiton was only 0.06% down on R370.99.
- Fin24
By midday the All-share index was again below 52 000 points and only 0.03% lower than Tuesday at 51 924 points, while the Top 40 index also traded 0.03% lower at 46 774 points.
The market definitely lacked direction on Wednesday and the All-share index was quite volatile in a range of about 200 points or 0.35%.
It is now the third time in about two weeks that an onslaught by the All-share index to break decisively through the 52 00 points level has lost steam at the last moment.
Some analysts think investors are becoming nervous about share valuations at these levels, particularly as South Africa's economic prospects continue to deteriorate and the possibility of further interest rate hikes seem stronger now than a while ago.
This could negatively affect the results of companies which are already trading at high price to earnings ratios.
The technical research team of Imara SP Reid, however, said in its daily market snapshot that the market’s momentum is still upward. The two major indices are building strong support levels and Tuesday’s strong run was mainly due to a rebound from these levels.
The market was waiting for the latest inflation news to see what will happen with interest rates, but the figures were better than expected.
South Africa's headline consumer inflation was steady at 6.6% year-on-year in June compared with May, Statistics SA said on Wednesday, against market expectations that it would quicken to 6.7%.
On a month-on-month basis, CPI came in slightly higher at 0.3% in June from 0.2% previously.
Core inflation, which excludes the prices of food, non-alcoholic beverages, petrol and energy, edged higher to 5.6% from 5.5%.
The news from overseas markets is also mostly positive, with Wall Street strengthening due to solid company results. These better-than-expected results are achieved through a combination of demand growth, cost cutting, and/or share repurchase activity.
Still, several members of the blue chip index reported results that disappointed analysts. McDonald's and Coca-Cola, which depend on the consumer market, reported results that did not meet market expectations, due to suppressed sales in Europe and the US.
This indicated that the US economy is not completely out of the woods yet.
The market was also influenced by the strong rand, which traded at R10.51 to the dollar (the strongest in a month) by midday on Wednesday.
Some of the big double-listed shares, which are mostly in the industrial and resources sectors, earn most of their income abroad and their results are influenced by fluctuations in the rand.
By midday on Wednesday the industrial index was only 0.23% lower than Tuesday. Imara SP Reid said the past month's trading action has seen the sector mostly consolidate.
The overall trend for industrials, however, retains it bullish bias.
The major shares in the sector were mostly marginally lower. Naspers traded only 0.12% lower on R1 297.78 and SABMiller lost 0.96% to R609.62. Richemont was 0.29% lower on R370.99.
The resources sector, which added 1.82% on Tuesday, was only 0.17% higher and is still above 60 000.
Anglo American, which set a new 52 week high of R287.21 on Tuesday, gave up 0.5% to trade at R285.75. BHP Billiton was only 0.06% down on R370.99.
- Fin24