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Johannesburg - Resources shares on the JSE were sharply lower on Tuesday morning, which also pulled the rest of the market substantially lower.
By midday the All-share index was again below 50 000 points after last week’s strong rally led by SABMiller [JSE:SAB], while the Top 40 index again slipped below 45 000, and close to important resistance levels.
The reason for the drop of more than 4% in resources shares was once again a strong dollar, which according to analysts is becoming a safe haven amid current uncertainties about the global economy.
A strong dollar is bad news for commodities as it attracts money from commodities which are also regarded as safe havens; this in turn leads to new pressure on already low commodity prices.
By midday the All-share index was already 1.56% softer at 49 948 points while the Top 40 index lost 1.74% to 44 592, which means that an important resistant level of 44 380 points are again within reach.
Top commodity shares such as Anglo American [JSE:AGL], Glencore [JSE:GLN], Harmony [JSE:HAR] and Lonmin [JSE:LON] all lost more than 5% during the morning’s trade and not even a weaker rand, which again traded at R13.62 to the dollar, could contribute to a better mood on the market.
The Resources index traded 4.20% lower and the Gold index lost 1.65%. Even the Industrial index was 1.51% softer, while the Financial index lost 0.85%.
The JSE’s drop is not totally in line with world markets as the Asian markets were mostly higher on Tuesday morning, with the Chinese market posting its longest winning streak in almost a year. The Hong Kong market was also higher.
The Asian markets were supported by high expectations of President Xi Jinping’s state visit to the US. China and the US are expected to reach agreements on trade, energy, defence, infrastructure and other matters during Xi’s visit from September 22 to September 25. Deals announced before the trip include the first Chinese-made bullet train project in the US.
US stocks also rose, although not convincingly after the Federal Reserve’s chief in Atlanta, Dennis Lockhart, said concern over the turmoil in global markets should prove temporary.
The European markets were however lower, with the Dax index in Frankfurt and the CAC 40 index in Paris both more than 2% lower.
The biggest losers in the commodity sector were again Glencore and Lonmin, which continued their free fall on Tuesday. By midday Glencore was another 8.36% softer at R22.91. Before Tuesday’s sharp drop, the stock had already lost 34.1% over the past 30 days and 54.1% over the past 90 days.
Lonmin traded 6.68% lower at R4.05, after trading exactly a year ago at a 52-week high of R35.29. Before Tuesday the share price lost 47.5% over the past 30 days and a massive 83.4% over the last 90 days.
Anglo American was also under severe pressure. The share price, which today a year ago stood at R260.12, on Tuesday morning traded another 6.69% lower at R136.46. Investors lost 43.7% over the past year and 27.9% over the past 30 days.
BHP Billiton [JSE:BIL], which is more resilient than some of other commodity shares, traded 3.85% softer at R217.03. The share lost 20.8% over the past 30 days.
In the gold sector Harmony lost 8.03% to trade at R9.73 after the share price recovered by 17% over the past seven days. Over 90 days the share price is 45.9% down and over 90 days 59.5%.
