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Johannesburg - Resources shares on the JSE recovered strongly on Tuesday morning to push the major indices marginally in the black by midday.
Analysts said technical indicators show there is currently a significant battle between the bulls and the bears and whatever the result, the market is likely to move decisively in that direction.
By midday the Resources index, which was highly volatile on Monday, was 2.7% higher which helped the All-share index 0.21% higher at 51 715 points, while the Top 40 index was 0.30% stronger at 46 468 points. On Monday the Resources index was at one stage more than 5% lower, but recovered to close only 1% softer.
The Industrial index hardly moved and was only 0.07% stronger, while the Financial index gained 0.31%. The Gold index was 3.29% stronger.
Imara SP Reid expected the market tone to improve on Tuesday morning, but it was eventually only resources and gold shares which benefited.
The company said in its daily Market Snapshot that the exceptionally oversold resources sector was supported by a combination of very short-term factors, including fund flow at the commencement of the new month and bargain-hunting.
The market is expected to break out in a particular direction soon as the All-share and Top 40 indices are both trading at near-term inflection points, which will play an important role in their direction over the next two to three weeks.
The All-share index is currently wedged between the 200-day moving average and a crucial near-term support area. This trading zone represents a significant battleground for the bulls and the bears, which will decide which way the market will move.
Resources shares also had a break on Tuesday morning as the dollar fell against the yen, euro and a string of emerging Asian currencies as investors turned cautious. Analysts said the long-awaited US interest rate hike is increasingly discounted after traders have been bidding up the dollar in anticipation of the rate rise.
The prices of gold and platinum improved on Tuesday morning on the back of a softer dollar. Platinum gained 1.22% to $841.51 per fine ounce, while gold gained 0.49% to $1 069.91.
Chinese stocks also rose as property companies rallied the most in three months on speculation the government will loosen monetary policy. New data indicated that manufacturing conditions deteriorated even further, putting pressure on the government to add to the six interest rate cuts since November last year.
BHP Billiton [JSE:BIL], which lost more than 5% at one stage on Monday, made a strong recovery and traded 3.77% higher at R176.22. It seems the market has discounted the news that Brazil filed a lawsuit on Monday against two of the world’s largest mining companies, including BHP Billiton, for $5.2bn to clean up what it says was its worst environmental disaster which was caused by the collapse of a tailings dam.
Anglo American [JSE:AGL] gained only 0.36% to R88.14 and Anglo American Platinum [JSE:AMS] was 0.09% softer at R199.82.
Standard Bank [JSE:SBK] and FirstRand [JSE:FSR] were again the busiest shares in the financial sector. Standard Bank lost 0.75% to R128.86, but FirstRand gained 0.68% to R47.34.
Alexander Forbes [JSE:AFH], which lost more than 13% on Monday on disappointing results, at midday was another 3.21% lower at R6.34. The financial services group said rising unemployment and retrenchments in its client base hurt profits, as job losses led to savings withdrawals.
Alexander Forbes – which administers around a quarter of the domestic employee benefits market – reported an 8% decline in operating profit.
