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Johannesburg - Resources shares kept the JSE in the black on Monday when shares in the sector responded positively to the news that China's central bank on Sunday cut rates by 25 basis points - after two similar moves since November.
Although the move was expected, and already discounted by investors in resources shares, some of the major double listed resources shares rose sharply in early trade as it pulled the Resources index, as well as die rest of the market higher.
The two biggest resources shares, Anglo American [JSE:AGL] and BHP Billiton [JSE:BIL], both gained more than 3%, pulling the Resources 10-index 2.85% higher on 45 223 points. This helped to raise the All Share-index 0.52% higher to 54 067 points. The Top 40-index was 0.59% stronger on 47 999 points.
Nothing much happened on the rest of the market with Financials 0.21% lower, the Industrial index only 0.15% higher and the Gold index only 0.22% higher.
Monday’s gains meant the Resources index was more than 10% stronger than the low point for the year of 39 448, which was reached on 12 April. For the year to date the Resources index is only about 3% higher.
With the All Share-index back above 54 000 points it is now about 2% weaker than the all time high of 55 188 points reached on the 26th of April.
The strong run by the Resources index was mainly due to the latest stimulus by the People's Bank of China, which has also reduced the amount of cash lenders must keep in reserve twice this year.
READ: Rand backtracks on China rate cut
The move was expected, and discounted by the market, after a series of disappointing economic indicators, with inflation coming in below forecasts for April and exports unexpectedly falling.
"The consensus was that there'll be at least one or two more stages of monetary easing in China, so there will be no big surprise," Shoji Hirakawa, chief equity strategist at Okasan Securities in Tokyo, told Bloomberg News.
"The timing was however earlier than expected, so they've probably moved assuming a positive reaction to that."
The mood was also given a boost by the monthly US jobs report released on Friday. A total of 223 000 jobs was created last month, which was roughly in line with expectations after March's sharp fall in job creation. The jobless rate dipped 0.1 percentage points to 5.4%.
Analysts said the report, while solid, was likely not strong enough to hasten higher interest rates from the US Federal Reserve.
Anglo American and BHP Billiton were outperforming the rest of the resources sector with Anglo American trading 3.81% higher on R211.00.
The share was one of the busiest on the market on Monday morning and 1.31 million shares were sold for R238.8m. Despite this morning’s gains, the share price is still more than 2% lower for the week and more than 7% over the past 90 days.
BHP Billiton traded 3.16% higher on R294.36. The share price is only 0.17% higher over the past week but is more than 12% stronger over the past 90 days.
Some of the other blue chip commodity shares did not do so well. Kumba [JSE:KIO] was only 0.04% stronger on R161.61 and it seems as if the past weeks’ recovery is now over. Kumba is now 2.39% weaker and still 57.34% lower for the past twelve months.
Sasol [JSE:SOL] was also 1.63% softer on R458. This means the share lost 5.53% over the past week but is still 10.8% stronger for the past month.
