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Sanity returns to JSE as oil recovers

Johannesburg - Sanity returned to the JSE on Tuesday morning, after the oil price recovered sharply after hitting five-years low on Monday.

The stronger oil price also gave other resources a boost and by midday the Resources index, which at one stage on Monday was 7% lower than the previous day, was 2.9% higher.

In fact by midday all the major indices were higher than the previous day, although the Gold index has given up some of its earlier gains.

By midday on Tuesday the All-share index was 1.09% higher at 49 393 and the Top 40 index gained 1.27% to 43 783. That means  the Top 40 recovered again to above the important resistance level of 43 600, which must be held for the market to progress further.

The general consensus is that the market is oversold after the turbulence of the previous two days. The Financial index improved by 0.56% and the Industrial index gained 0.82%.

The Gold index was close to 6% higher on the back of a higher gold price which recovered to above $1 200 per ounce, but when the gold price lost steam and fell back again to below $1 200/oz gold shares gave up some of their gains. By midday the Gold index was only 1.91% higher.

Gold posted its biggest daily gain in more than a year to about $1 208/oz but was trading again at $1 194 by midday. The oil price was lifted overnight by data suggesting the tumbling oil prices may have started affecting drilling activity in the fast-growing US shale oil industry.

When Opec decided last week not to curb production in an effort to support the oil price, which sent prices diving, the theory was that the oil-producing countries in the Middle East were trying to squeeze new, higher cost production elsewhere in the word out of the market by letting the price fall even further.

The current glut in oil stocks is predominantly due to sharp increases in the production of shale oil in the US, which is more
expensive to produce than crude oil.

Sasol [JSE:SOL], the biggest loser of the previous two sessions having lost 8.5% on Friday and 6.81% on Monday, regained 2.79% on Tuesday morning to trade at R442.50. The share lost 19.6% over the last week and is now 13.6% lower for the year, after reaching a 52-week in June this year.

The other major oil producer on the JSE, BHP Billiton [JSE:BIL], improved by 3.21% to R264.60. Anglo American [JSE:AGL] was 2.47% higher at R229.15.

Among the gold shares, Sibanye [JSE:SGL] improved by 3.94% to R20.04 and Harmony [JSE:HAR] traded 1.64% higher at R18.56. AngloGold Ashanti [JSE:ANG] reached a high of R102.98 at one stage, about 3% higher than Monday, but gave it all up and by midday was 0.77% lower at R99.48.

MTN [JSE:MTN], which lost 7.7% over the last week due to concerns about the negative influence of the lower oil price on the Nigerian economy, also recovered on Tuesday and was 1.99% stronger at R212.77.

Naspers [JSE:NPN] also regained some of the losses of the previous sessions and gained 2.55% to R1 438.74.
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