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Financial shares crown JSE rally

Johannesburg - Financial shares rebounded strongly on the JSE on Friday and the rest of the market also followed on the back of strong international markets, which are again trading at new highs after a short correction earlier in the week.

The recovery on the JSE started on Thursday afternoon and gained further momentum on Friday morning.

By mid-morning the All-share index was already 1.23% higher at 52 966 points, while the Top 40 index traded 1.44% stronger at 45 865 points.

Besides the Financial index, which at that stage was 1.73% higher, the Industrial index gained 1.40% on the back of stronger European markets while the Resources index was 0.63% stronger.

World markets are still performing well because investors are looking for alternatives for ultra low bond yields as central banks contemplate even further easing to stave off a possible recession due to Brexit fall-out.

Asian shares strengthened even further on Friday morning to new one-year highs, as investors were hoping that weaker-than-expected Chinese economic data would spur further policy easing in the world’s second biggest economy.

China's fixed asset investment from January to July increased by 8.1% from a year earlier, the slowest rate in more than 16 years, compared with expectations for 8.8%. The growth in retail sales and industrial production was also lower than expected.

Wall Street closed at a new record on Thursday and European markets strengthened even further on Friday morning, with the FTSE 100 index in London on a 140-month high and Frankfurt's DAX index officially in a bull market after gaining more than 20% this year.

MSCI's 46-country All-World index was close to a one-year high touched overnight.

An oil price hike also supported investor risk appetite, as the price climbed more than 4% overnight after a Saudi Arabian oil minister hinted at possible action to stabilise prices and the International Energy Agency said it expected the supply and demand balance to tighten towards year-end.

At mid-morning Brent crude traded at $46.02 per barrel and was set to end a volatile week 4.7% higher.

The local market is lagging far behind world markets, as the All-share index before Friday’s run was only 1.43% higher over the past 90 days, while the Top 40 index is still 0.61% lower.

The mood on the JSE also received a boost from some good news on the local economy. South Africa’s manufacturing output rose more than expected in June, while mining production shrank at a slower rate than market estimates.

This raised hopes that that the South African economy rebounded in the second quarter after negative growth in the first quarter, thus avoiding a technical recession.

The market’s attention is still on Old Mutual [JSE:OML] after the share price of the dual-listed financial services group dropped more than 5% on Thursday in reaction to disappointing results.

The market on Friday however focused on the group’s proposed restructuring into four stand-alone businesses, which should be materially completed by the end of 2018. Old Mutual Group CEO Bruce Hemphill said progress is being made to ensure that each of the four units will be ready and capable of functioning as independent entities.

Old Mutual was again the busiest share on the JSE in terms of volume and gained 2.47% to R38.11. Nedbank [JSE:NED], which would be one of the stand-alone businesses, traded 4.36% stronger at R244.99. Before Friday’s strong gain the share was already 15.56% higher over the past 30 days.

Sanlam [JSE:SLM], which before Friday’s trade was already 14.7% higher over the past 30 days, gained 2.33% to trade at R69.27.

Among the top banks Standard Bank [JSE:SBK] traded 1.65% higher and FirstRand [JSE:FSR] gained 1.12% to R50.65.

Shoprite [JSE:SHP], which is almost 25% higher than a month ago when it announced strong sales growth in South Africa and other African countries, gained another 0.92% to yet another high of R208.91.

Pick n Pay [JSE:PIK] is also at a high of R83.63 after it gained 1.49% in morning trade.

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