Johannesburg - The JSE was up‚ but came off its highs of this morning during midday trade‚ after the positive eurozone news of direct recapitalisation of banks‚ had fizzled out slightly.
“We had a bounce this morning after a horrible day yesterday‚ but the JSE has come down again and still seems nervous and is driven by newsflows from overseas. Be it news from the eurozone‚ China or the US‚ our market is reacting to world economic growth‚ and that is slowing‚” said Ferdie Heyneke‚ portfolio manager at Afrifocus.
At 11:40 local time‚ the JSE All Share [JSE:J203]
index was up 0.62% at 33 459.99 points‚ with resources recovering 1.20%‚ while gold shares lost 1.11% and platinum counters added 0.54%.
Financials were up 0.14%‚ while banking stocks shed 0.13% and industrials added 0.52%.
The rand was firmer at 8.26 to the US dollar‚ from 8.43 at the JSE’s close on Thursday‚ while gold was quoted at $1 569.50 a troy ounce from $1 553.25/oz at the JSE’s previous close and platinum recovered to $1 407.00/oz‚ from $1 395.70/oz previously.
Overseas investor confidence returned to global markets after eurozone leaders agreed to allow direct recapitalisation of banks after a single bank supervisor was set up. Eurozone leaders agreed that the permanent bail-out fund‚ the European Stability Mechanism (ESM)‚ would not have senior creditor status when it takes over the loans granted to Spanish banks‚ Dow Jones Newswires reported.
European Council president Herman van Rompuy said eurozone banks would be able to directly access the bailout mechanism once a single bank supervisor was established.
A growth pact involving some €120bn ($149.5bn) in stimulus measures was agreed‚ which includes a promise of new capital for the European Investment Bank‚ and measures to speed up and better target as much as €55bn in EU budget funds.
Dow Jones Newswires reported the euro was up against the dollar in Asian trading and stock markets were stronger. There was a huge rally in Spanish and Italian bonds in European trading. The Spanish 10-year yield fell around half a percentage point to 6.44% and the Italian 10-year was down more than 30 basis points to 5.85%‚ according to Tradeweb.
Equity markets were up‚ and bank shares in Spain and Italy were rallying. London’s FTSE 100 Index opened 1.8% higher‚ Germany's DAX gained 2.5% and Paris's CAC-40 Index jumped 2.9%. The euro is substantially stronger against the dollar at $1.2586.
However Nomura fixed-income strategist Desmond Supplesaid the market had overreacted to the EU summit. He said the announcements regarding the European Stability Mechanism (ESM) did not meaningfully improve the policy response to the eurozone crisis‚ citing the ESM’s difficulties of funding in size and at the pace required and the issue of the seniority of the ESM in bond buying. “Nomura thinks that for the euro to remain intact‚ it would require very aggressive quantitative easing from the ECB‚” he said.