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Johannesburg - The JSE did not follow European markets higher on Tuesday morning as investors are still busy with selective profit-taking in the resources sector, which has had a strong run over recent weeks.
Although the Financial and Industrial indices on the JSE were only marginally softer by mid-morning, the Resources index was almost 2% lower with some of the high flyers sharply down.
At that stage the All-share index was already 0.69% softer at 51 936 points and the Top 40 index traded 0.62% down at 46 064 points. The Financial index was only 0.01% lower and the Industrial index shed 0.48%, but the Resources index lost 1.92% in morning trade.
Market attention on Tuesday morning focused on the US economy, after data released on Monday indicated that the US economy is maybe not as strong as recent data seemed to suggest.
The news put the focus on Janet Yellen, chairperson of the Federal Reserve, who was due to speak before the Economic Club of New York at 15:30 GMT. Weaker-than-expected US consumer spending data on Monday prompted analysts to suggest the central bank would be cautious about raising rates this year. Fed policymakers earlier this month projected two rises in 2016, with some saying the first could come next month.
Lower US interest rates are good news for markets worldwide, and the European markets responded positively. However, the weaker sales data is also negative for commodities as it indicates that demand in the world’s biggest economy is not as strong as originally suggested.
The oil price also traded below $40 per barrel on indications that US stockpiles have reached record levels - another sign of weaker-than-expected demand. This gave investors the perfect excuse to cash in some of the resources sector's pectacular profits of the last few weeks.
ArcelorMittal [JSE:ACL] and Kumba [JSE:KIO], two shares involved in the production of steel which both doubled in value this year, were among the biggest losers on Tuesday. By mid-morning ArcelorMittal was already 16% softer at R7.56. The share, which traded as high as R10.20 at the beginning of March, is however still 68% higher over the past 90 days.
Kumba’s wild swing continued and the stock lost 8.38% in morning trade to R65.97. Kumba’s share price shot up from a low of R25.35 on January 19 this year to R110.95 on March 6 before profit-taking started. Although Tuesday morning's share price was 45% lower than the high at the beginning of the month, the stock is still more than 60% higher over the past 90 days.
Lonmin [JSE:LON] traded 8.87% softer at R25.35, which meant the share is now 35% lower from the high of R40.19 reached in early March this year. However, it traded at a low of only R8.70 in January this year and is therefore still more than a third higher for the year to date.
Anglo American [JSE:AGL], which gained more than 50% in value over the past 30 days, slipped 3.27% to R106.52. BHP Billiton []JSE:BIL], which is 17% higher than a month ago, lost 2.51% on Tuesday morning to trade at R166.70.
Shoprite [JSE:SHP] at one stage on Tuesday morning reached a new 52-week high of R179.97, but lost momentum and at mid-morning traded 0.60% down at R175.72. The share price gained more than 20% over the past 30 days.
Vodacom [JSE:VOD] also flirted with a new 52-week high in the morning and at one stage was as high as R156.97. By mid-morning it traded 0.40% up at R155.65.
Steinhoff [JSE:SHF] and Bidvest [JSE:] also lost ground after reaching new 52-week highs in early trade. Steinhoff was only 0.03% softer at R95.01 after trading at a high of R95.89 and Bidvest lost 1.99% to R364.55, after reaching a high of R372.31 in early trade.
