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Johannesburg - The continuous drop in the oil price is making investors worldwide very nervous and stock markets were under pressure again on Thursday - including the JSE.
Even the US markets, which were setting up new records almost on a daily basis, tumbled more than 1.5% last night as a pullback in petroleum stocks sparked a selloff in the broader market.
As is often the case, the nervousness on Wall Street spilled over to Asia and to Soyth Africa, where the major indices on the JSE all opened sharply lower.
But by midday, most of the earlier losses on the JSE were recovered and indices were only modestly lower. By midday the All-share index was only 0.36% down on 48 570 points and the Top 40-index lost 0.44% to 42 975 points.
The Financial index which started about 0.65% lower, were even in the black by midday and traded 0.41% higher and the Industrial index was only 0.17% lower.
The big double listed companies in the industrial index with major interest abroad are benefitting from the weak rand which was trading at R11.50 to the dollar.
The big loser was again the Resources index, with Sasol [JSE:SOL] and BHP Billiton [JSE:BIL] further down on new 52-week lows. The Resources index was 1.80% lower.
The volatile Gold index, which had a strong run the last few days as investors turn to gold as a safe haven, fell victim to profit taking this morning and was 3.83% down. The fundamentals for gold did not change much as the gold metal still traded at $1 222 per ounce this morning.
The lower gold price is seen as a symptom of poor economic growth, but on the other hand a low oil price is good for the economy.
Investors are worried about the "unknown" of "how this decline in oil prices will affect other sectors of the economy", said David Levy, portfolio manager at Kenjol Capital Management. Peter Coleman, head of trading at Convergex, said that the free-fall in commodity prices "makes people nervous".
The S&P 500 volatility index, sometimes called the "fear index", rose to its highest level since mid-October.
Wednesday's drop in the oil price was triggered by the Saudi oil minister Minister Ali al-Naimi, who shrugged off suggestions that the kingdom might cut output, sticking to his comments from two weeks ago in Vienna, where he first said that the market would be left to correct itself, meaning the world's biggest oil producer would not cut its output.
The latest data also showed a spike in US inventories and US crude fell to near $60 per barrel.
Brent settled down $2.60, or 3.9%, at $64.24 a barrel after tumbling to $63.56, its lowest since July 2009.
The attention on the JSE is still on Sasol and BHP Billiton, the two biggest shares with a connection to the oil price, and it seems that the end of the decline is not in sight.
Sasol lost another 1.78% to R394.81 and is now 35% lower than the 52-week high of R645.10 reached in June this year, before the oil price started its decline.
Investors are not only worried about the influence of the low oil price on Sasol's income, which is directly linked, but also on the effect that the low oil price will have on the sustainability of its big capital spending projects, particularly the massive gas to fuel project that will be built in Louisiana in the United States.
Although Sasol is already trading at a price earnings ratio of only 6.56 some analysts think that the share will only offer value in the current oil price scenario at R330 per share.
BHP Billiton was 1.61% softer on R247.95 but the share price was very volatile and was at one stage higher than Wednesday after a poor start, but then the share lost momentum.
From the biggest resources shares on the JSE are also trading at 52-week lows and amongst them are Exxaro [JSE:EXX] (-2.3%), Amplats [JSE:AMS] (-1.86%), Assore [JSE:ASR] (-1.9%) and African Rainbow Minerals [JSE:ARI] (-0.94%).
Amongst the winners that reached new 52-week highs are MMI Holdings [JSE:MMI], which rose with 5.47%, Astral [JSE:ARL] (2.67%), the Spar group [JSE:SPP] (1.59%) and Zeder [JSE:ZED] (0.28%).
