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Worldwide bond sell-off impacts JSE

Johannesburg - The technical recovery in the price of resource shares on the JSE continued on Tuesday morning, but the rest of the market is feeling the effects of the worldwide sell-off in bonds, which is causing uncertainty among investors in equity markets.
 
The gains in the resources could not pull the rest of the market higher as it did on Monday and by midday the All–share index was marginally lower.
 
Most world markets are currently under pressure as the trading environment is dominated by the activity in the bond markets, with government bond yields rising sharply, particularly in the US where the 10-year Treasury yield is trading beyond 2.20%.
 
In their daily market snapshot Imara SP Reid technical analysts said that the near-term trading action in the bond market seems slightly overdone from a technical perspective, but suggests a sense of unease among market participants with regard to interest rates in the latter half of 2015 and into 2016.
 
Standard & Poor's 500-index on Wall Street has remained largely unchanged over the past eight weeks, as investors appraise the overall economic environment against a backdrop of heightened sensitivity towards potential interest rate adjustments in the US.
 
The mood is also spoiled by the continuous uncertainty about Greece as the Greek Government seems unable to reach a deal with its creditors, despite a severe lack of liquidity.

South African Government bonds also fell sharply on Tuesday with the yield on bonds maturing in 2026, the benchmark for the market, spiking 11.5 basis points higher to 8.205%. It pulled back later on.

The financial and industrial indices on the JSE were, therefore, under moderate pressure, as higher bond yields worldwide can lead to an outflow of the foreign capital that is currently seeking higher yields in South Africa, while rates are at record lows in the developed world.
 
By midday the All-share index on the JSE was 0.23% lower on 54 039 points and the Top 40-index was 0.17% softer on 48 018 points.

At that stage the industrial index lost 0.44% with most of the big double listed conglomerates, which are popular among foreign investors, trading lower. The sell-off in banking shares also continued and the financial index lost 0.59%.

The resources index was 1.22% higher. The index gained more than 1.5% in the first half hour of trading and then lost half of it before it started recovering again before midday.

Imara SP Reid described the resurgence in the prices of resource shares, which gained more than 10% in a month, as a workmanlike technical rebound.

The resource shares are also supported by the weaker rand, which is also a result of the sell-off in Government bonds.

The big conglomerates in the resources sector continued their recovery this morning. Anglo American [JSE:AGL] gained 2.01% to R214.29 after Monday’s gain of more than 3%, supported by strong performances by its subsidiaries, Kumba Iron Ore Company [JSE:KIO] and Anglo American Platinum [JSE:AMS].

Kumba traded 4.87% stronger on R167.90 and Anglo American Platinum rose 2.04% to R330.03. BHP Billiton [JSE:BIL] was 1.79% stronger on R299.37, but Glencore [JSE:GLN] lost 0.05% to R57.25.

Among the big industrial shares SABMiller [JSE:SAB] lost 0.80% to R667.61 and British American Tobacco [JSE:BTI] was 0.75% weaker on R673.51. Naspers [JSE:NPN] also lost ground again and at midday its share price was another 1.17% lower at R1 776.64.

Among the banking shares FirstRand [JSE:FSR] traded 0.48% softer on R54.26 and Standard Bank [JSE:SBK] only 0.14% lower on R169.79.

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Rand - Dollar
19.01
-0.5%
Rand - Pound
24.01
-0.5%
Rand - Euro
20.52
-0.3%
Rand - Aus dollar
12.35
+0.0%
Rand - Yen
0.13
-0.6%
Platinum
900.15
+0.4%
Palladium
1,000.00
-0.2%
Gold
2,209.40
+0.7%
Silver
24.58
-0.3%
Brent Crude
86.09
-0.2%
Top 40
68,189
+0.8%
All Share
74,373
+0.6%
Resource 10
57,035
+2.5%
Industrial 25
103,662
+0.4%
Financial 15
16,492
-0.2%
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