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Analysts have been saying for a long time that resources stocks are exceptionally oversold, and it seems Monday morning's technical rebound was long overdue.
However, this took place amid falling international markets, which indicated that the uncertainty is far from over.
By midday the All-share index was 0.48% higher at 47 318 points and the Top 40 index recovered by 0.57% to 42 152.
The overall indices were dragged higher by the Resources index, which gained more than 1 000 points or 2.43% by midday on Monday.
Industrials lost 0.35%, but the Financial index was also 0.74% higher.
Resources stocks were also supported by the weaker dollar, which lost momentum on global concerns about international economic growth.
On Friday the US markets traded sharply lower at the close of the week, largely as a result of general concerns with regard to global macroeconomic growth, but weakness was also exacerbated by a lack of traction in computer chip manufacturers.
Investors are concerned that the poor economic conditions worldwide will hurt the earnings of American companies with global business interests.
On Monday morning the Asian markets traded lower despite better than anticipated economic data, and the European markets followed.
READ: Asian markets sink on global economy fears and European shares slide on global fiscal growth
This weekend there were fears that Europe’s biggest economy, Germany, is approaching a recession while France’s credit rating was downgraded.
Analysts therefore warned that Monday morning’s rebound is too early to indicate whether the market has reached bottom.
Events over the next few days will probably indicate if the current drop in share prices is a major correction, or if the share market is entering a bear phase3.
By Friday evening the JSE was almost 10% lower than the high reached earlier this year. A 10% drop is regarded as a major correction, while market losses approaching 15% indicate a bear market.
The ability of some of the indices, which have dropped below important support levels, to recover to levels above those supports will be an important indication of what will happen.
On the domestic front, markets have their eyes on Finance Minister Nhlanhla Nene's debut mini budget statement next week, where he will likely cut economic growth forecasts while predicting a wider budget deficit, both negatives for the markets.
Anglo American [JSE:AGL] was the star performer among the big resources stocks and improved by 4.45% to R244.98. BHP Billiton [JSE:BIL] gained 2.61% to R294.52 and Glencore [JSE:GLN] rose 2.44% to R56.69.
Platinum shares also continued on the recovery path of the last few days and Anglo American Platinum [JSE:AMS] was 2.95% higher at R365.97. Impala Platinum [JSE:IMP] rose 2.54% to R86.64.
Kumba Iron Ore [JSE:KIO], which lost more than 20% over the last month and more than 40% over the last year, was 4.4% stronger at R278.70 by Monday midday.
- Fin24
