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Johannesburg - The strongest rally on Wall Street in almost four years, with the Dow Jones index gaining almost 4% on Wednesday night, brought calm to world market jitters on Thursday - including the JSE.
The Asian and European markets also rallied strongly in response to Wall Street and both China’s major indices were more than 5% higher. The JSE followed suit, with the major indices more than 1% higher and analysts saying the market is near its trading bottom.
By midday on Thursday the All-share index on the JSE was 1.10% higher at 43 047 points while the Top 40 index gained 1.01% to 43 000 points. The volatile Resources index was again the top performer with a 3.51% gain, while the Industrial (0.76%) and Financial indices (0.98%) were more subdued.
The rally on Wall Street was sparked by comments from US Federal Reserve officials which strongly hinted at no likelihood of an interest rate hike in September. The markets have been discounting a possible hike for a long time and that was one of the reasons for the current market correction, although most of the attention was on China’s economic problems.
Higher interest rates in the US could be bad for emerging markets as it could lead to an outflow to the US, where the risk is perceived to be less. Before Wednesday’s rally the US market had declined for six consecutive days.
New York Fed president William Dudley said on Wednesday that the argument for a September rate increase "seems less compelling" than only weeks ago, given the threat posed to the US economy by recent market turmoil.
Fears about the negative influence that a struggling Chinese economy can have on global growth also subsided after the Chinese central bank moved to ease monetary policy for the second time in two months to support the economy.
The two main Chinese indices surged 5.3% and 5.9% on Thursday, snapping a five-day losing streak that had wiped off around 20% from market value and sent tremors around global financial markets.
Technical analysts said on Thursday morning that the local market is trying to build support around current levels. For the moment the daily close of the Top 40 index at 42 149 points represents a near-term trading bottom which is likely to hold its ground.
Imara SP Reid said in its daily Market Snapshot that the market’s exceptionally oversold position indicates that the initial low established earlier in the week will hold for the moment, but it is important to note as we move into September that this technical area is likely to face a potential retest.
In the industrial sector Naspers [JSE:NPN] traded 1.83% higher at R1 705.69. The share price has been very volatile over the past few days with huge swings every day, but before Thursday morning's gain the stock lost 1.46% over the past seven days. The share is however 11.1% lower over the past 30 days on concerns over its huge exposure to the Chinese economy through its interest of 34.4% in Chinese internet giant Tencent.
Sasol [JSE:SOL] benefited from a stronger oil price, which recovered to just below $45 per barrel for Brent crude. The share price gained 3.77% to R396.33.
Woolworths [JSE:WHL] was one of the busiest shares on the JSE in terms of value on Thursday, but the stock did not rally in response to the strong results announced in the morning. The company said full-year profit climbed 24% as it gained market share, and sales improved by 42% due to the acquisition of the Australian department store operator David Jones.
Net income rose to R3.75bn in the year to June 28, compared to the estimate of R3.65bn of six analysts surveyed by Bloomberg. By midday on Thursday the share price was 2.75% lower at R96.17.
BHP Billiton [JSE:BIL] rallied in the resources sector and gained 4.17% to R215.10. Impala Platinum [JSE:IMP] was 3.10% stronger at R47.84 and Glencore [JSE:GLN] traded 1.4% higher at R29.60.
In the financial sector Standard Bank [JSE:SBK] rose 1.83% to R146.51. Among the insurers, MMI Holdings [JSE:MMI] was 1.85% stronger at R28.08 and Sanlam [JSE:SLM] 0.83% at R62.29.
