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Johannesburg - The run on the JSE over the last few days came to a halt on Thursday morning as markets worldwide gave a more negative interpretation to the US Federal Reserve’s latest monetary policy statement on interest rates than previous ones.
Although the actual wording of the statement did not differ much from earlier ones and the Fed reiterated that it will take its time with tightening monetary policy, its more upbeat outlook on US economic prospects put the skids on the markets and the JSE followed suit.
It could also be that the markets were just looking for an excuse to take profits after prices strengthened consistently over the last few days.
However, by midday on Thursday the major indices on the JSE recovered somewhat and should the pattern continue, the market could very well close in the black again.
At that stage the All-share index was only 0.24% lower at 51 075 points and the Top 40-index traded only 0.25% lower at 44 891 points. All the major indices were still lower, but their intraday graphs showed a definite V-pattern with prices recovering.
The Industrial index was only 0.18% lower and the Financial index lost 0.38%. The Resources index was still 0.47% lower and the Gold index 2.5% down, with Gold Fields [JSE:GFI] 3.64% lower at R63.45.
The strong dollar is becoming a bigger cause of concern, not only for American exporters but also for commodity prices including oil which is still close to six-year lows. Any hint of stronger growth and higher interest rates in America will strengthen the greenback even further
Higher interest rates will not only attract money from emerging markets with higher yields like South Africa back to America, but also low commodity prices as the strong dollar will also hurt South African shares.
One of the key questions on interest rates is what will happen to inflation in America. The Fed said on Wednesday that falling energy prices boosted household purchasing power and economic activity, but that also led to a decline in certain inflation measures. One of the Fed’s aims is to raise inflation to above 2%, and it will be very reluctant to hike interest rates before inflation is on an upward path.
The big news on the market was that Sasol [JSE:SOL] will delay the development of the first gas-to-liquids plant in the US as part of a raft of measures designed to conserve cash in the face of plummeting oil prices. The company’s fortunes are directly tied to the oil price. In 2013 it calculated that every $1 per barrel change in the average annual crude oil price would impact its operating profit by about R610m.
By midday the share price was 1.74% lower at R408.73, and according to the intraday graph the price was losing ground consistently throughout the morning.
Glencore [JSE:GLN] said it will start negotiations with unions on closing part of its Optimum colliery, which will halve production and affect 1 070 employees. The closure is the result of increasing pressure on coal mines as global prices have slumped over the past two years.
The price of export thermal coal through the Richards Bay Coal Terminal fell below $60 per tonne this week, 30% less than a year ago.
Glencore’s share price was initially sharply lower, but recovered later and by midday stocks were 0.20% higher at R44.85.
The share price of Lonmin [JSE:LON] dropped 0.68% to R29.10 after the group announced it will cut it capital expenditure by 26% to $185m due to the declining aluminium price.
READ: Lonmin maintains output target, cuts spending
Anglo American [JSE:AGL] bucked the initial trend on Wednesday and improved gradually throughout the morning. By midday the share traded 0.86% higher at R195.99.
Sappi [JSE:SAP] also improved strongly throughout the morning and by midday had reached a new 52-week high of R49.48, 5.28% higher than the previous day’s close.
Although the actual wording of the statement did not differ much from earlier ones and the Fed reiterated that it will take its time with tightening monetary policy, its more upbeat outlook on US economic prospects put the skids on the markets and the JSE followed suit.
It could also be that the markets were just looking for an excuse to take profits after prices strengthened consistently over the last few days.
However, by midday on Thursday the major indices on the JSE recovered somewhat and should the pattern continue, the market could very well close in the black again.
At that stage the All-share index was only 0.24% lower at 51 075 points and the Top 40-index traded only 0.25% lower at 44 891 points. All the major indices were still lower, but their intraday graphs showed a definite V-pattern with prices recovering.
The Industrial index was only 0.18% lower and the Financial index lost 0.38%. The Resources index was still 0.47% lower and the Gold index 2.5% down, with Gold Fields [JSE:GFI] 3.64% lower at R63.45.
The strong dollar is becoming a bigger cause of concern, not only for American exporters but also for commodity prices including oil which is still close to six-year lows. Any hint of stronger growth and higher interest rates in America will strengthen the greenback even further
Higher interest rates will not only attract money from emerging markets with higher yields like South Africa back to America, but also low commodity prices as the strong dollar will also hurt South African shares.
One of the key questions on interest rates is what will happen to inflation in America. The Fed said on Wednesday that falling energy prices boosted household purchasing power and economic activity, but that also led to a decline in certain inflation measures. One of the Fed’s aims is to raise inflation to above 2%, and it will be very reluctant to hike interest rates before inflation is on an upward path.
The big news on the market was that Sasol [JSE:SOL] will delay the development of the first gas-to-liquids plant in the US as part of a raft of measures designed to conserve cash in the face of plummeting oil prices. The company’s fortunes are directly tied to the oil price. In 2013 it calculated that every $1 per barrel change in the average annual crude oil price would impact its operating profit by about R610m.
By midday the share price was 1.74% lower at R408.73, and according to the intraday graph the price was losing ground consistently throughout the morning.
Glencore [JSE:GLN] said it will start negotiations with unions on closing part of its Optimum colliery, which will halve production and affect 1 070 employees. The closure is the result of increasing pressure on coal mines as global prices have slumped over the past two years.
The price of export thermal coal through the Richards Bay Coal Terminal fell below $60 per tonne this week, 30% less than a year ago.
Glencore’s share price was initially sharply lower, but recovered later and by midday stocks were 0.20% higher at R44.85.
The share price of Lonmin [JSE:LON] dropped 0.68% to R29.10 after the group announced it will cut it capital expenditure by 26% to $185m due to the declining aluminium price.
READ: Lonmin maintains output target, cuts spending
Anglo American [JSE:AGL] bucked the initial trend on Wednesday and improved gradually throughout the morning. By midday the share traded 0.86% higher at R195.99.
Sappi [JSE:SAP] also improved strongly throughout the morning and by midday had reached a new 52-week high of R49.48, 5.28% higher than the previous day’s close.
