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Johannesburg - The prices of commodity shares on the JSE dropped alarmingly on Monday morning, before they started to recover as the tumbling oil price continued to cause ripple effects throughout the global economy.
At one stage on Monday the Resources index was almost 7% lower than on Friday, when it dropped more than 5%, but by midday on Monday it was only 4.06% lower after gradually regaining lost territory.
The biggest loser was again Sasol [JSE:SOL] which was 6.87% lower by midday, after falling almost 9% earlier. On Friday the share also lost 8.5%, and 14% over last week.
The two major indices were also almost 4% weaker shortly after the opening, but by midday the All-share index recovered to 48 992, only 1.84% lower. By then the Top 40 index was only 1.84% weaker at 43 393.
The lower oil price, and its repercussions on the world economy, also hit the stock markets of other commodity-producing emerging markets such as Australia.
The oil price, which is at its lowest level in five years, is supporting the dollar which gained on expectations of lower inflation and therefore lower interest rates. The oil price fell to well below $70 per barrel after Opec decided last week not to curb production in an effort to push the price higher.
READ: Gold tumbles, oil hits 5-year low
The stronger dollar pushed other commodity prices lower, including copper and iron ore which are already at record low levels.
Commodity prospects were further dampened by news that the growth in China's manufacturing sector slowed in November, suggesting the world's second-largest economy is still losing momentum.
It now seems that the interest rate cut of November 21 failed to improve sentiment and there was little improvement in activity indicators in November.
Analysts said in order to maintain growth for the whole year at around 7.5% (the official target,) the Chinese authorities will have to intensify easing efforts in December to accelerate growth momentum
The official purchasing managers' index eased to an eight-month low of 50.3 last month, the National Bureau of Statistics said on Monday, still indicating a modest expansion in activity but below forecasts for 50.6 and October's 50.8.
The income of Sasol [JSE:SOL] is linked directly to the oil price, which is now about 49% lower than earlier this year. By midday the share traded at R430.20, but at one stage it was as low as R420.00. The share price lost 22.6% over the last six months and is now 8.4% lower for the year, after trading at a 52-week high as recent as June this year.
Major oil producer BHP Billiton [JSE:BIL], which lost 5.7% on Friday, also dropped by more than 5% early on Monday but by midday was only 2.35% lower at R255.94. Anglo American [JSE:AGL] was 2.45% lower at R232.22 after recovering some of its losses earlier in the day.
As usual the price of iron ore producers was severely hit and by midday Monday Assore [JSE:ASR] was another 3.13% lower at R174.79. Kumba [JSE:KIO] lost 2.79% to 250.52.
The Gold index was also more than 6% lower by midday after the price fell more than 2% at one point to $1 142.90 per ounce, its lowest level in more than three weeks. The price dropped after Swiss voters rejected a proposal to force the central bank to buy more gold. The metal later recovered to $1 155.37.
If Swiss voters had approved the proposal in Sunday's referendum, the Swiss National Bank would have been forced to more than double its gold reserves.
AngloGold Ashanti [JSE:] and Harmony [JSE:HAR] were both more than 5% down shortly after the opening. By midday AngloGold Ashanti traded 4.34% softer at R94.50 and Harmony was 5.15% lower at R17.80.
The Industrial index lost 1.14% on Monday morning and one of the heavyweights in the sector, Naspers [JSE:NPN], traded 2.39% lower at R1 399.72. At one stage the share was as low as R1 360.00. The Financial index was 1.48% weaker.
At one stage on Monday the Resources index was almost 7% lower than on Friday, when it dropped more than 5%, but by midday on Monday it was only 4.06% lower after gradually regaining lost territory.
The biggest loser was again Sasol [JSE:SOL] which was 6.87% lower by midday, after falling almost 9% earlier. On Friday the share also lost 8.5%, and 14% over last week.
The two major indices were also almost 4% weaker shortly after the opening, but by midday the All-share index recovered to 48 992, only 1.84% lower. By then the Top 40 index was only 1.84% weaker at 43 393.
The lower oil price, and its repercussions on the world economy, also hit the stock markets of other commodity-producing emerging markets such as Australia.
The oil price, which is at its lowest level in five years, is supporting the dollar which gained on expectations of lower inflation and therefore lower interest rates. The oil price fell to well below $70 per barrel after Opec decided last week not to curb production in an effort to push the price higher.
READ: Gold tumbles, oil hits 5-year low
The stronger dollar pushed other commodity prices lower, including copper and iron ore which are already at record low levels.
Commodity prospects were further dampened by news that the growth in China's manufacturing sector slowed in November, suggesting the world's second-largest economy is still losing momentum.
It now seems that the interest rate cut of November 21 failed to improve sentiment and there was little improvement in activity indicators in November.
Analysts said in order to maintain growth for the whole year at around 7.5% (the official target,) the Chinese authorities will have to intensify easing efforts in December to accelerate growth momentum
The official purchasing managers' index eased to an eight-month low of 50.3 last month, the National Bureau of Statistics said on Monday, still indicating a modest expansion in activity but below forecasts for 50.6 and October's 50.8.
The income of Sasol [JSE:SOL] is linked directly to the oil price, which is now about 49% lower than earlier this year. By midday the share traded at R430.20, but at one stage it was as low as R420.00. The share price lost 22.6% over the last six months and is now 8.4% lower for the year, after trading at a 52-week high as recent as June this year.
Major oil producer BHP Billiton [JSE:BIL], which lost 5.7% on Friday, also dropped by more than 5% early on Monday but by midday was only 2.35% lower at R255.94. Anglo American [JSE:AGL] was 2.45% lower at R232.22 after recovering some of its losses earlier in the day.
As usual the price of iron ore producers was severely hit and by midday Monday Assore [JSE:ASR] was another 3.13% lower at R174.79. Kumba [JSE:KIO] lost 2.79% to 250.52.
The Gold index was also more than 6% lower by midday after the price fell more than 2% at one point to $1 142.90 per ounce, its lowest level in more than three weeks. The price dropped after Swiss voters rejected a proposal to force the central bank to buy more gold. The metal later recovered to $1 155.37.
If Swiss voters had approved the proposal in Sunday's referendum, the Swiss National Bank would have been forced to more than double its gold reserves.
AngloGold Ashanti [JSE:] and Harmony [JSE:HAR] were both more than 5% down shortly after the opening. By midday AngloGold Ashanti traded 4.34% softer at R94.50 and Harmony was 5.15% lower at R17.80.
The Industrial index lost 1.14% on Monday morning and one of the heavyweights in the sector, Naspers [JSE:NPN], traded 2.39% lower at R1 399.72. At one stage the share was as low as R1 360.00. The Financial index was 1.48% weaker.
