JSE gets fillip as financial shares rise

Johannesburg - Financial shares on the JSE followed European markets higher on Monday, which also gave the major indices a slight boost.

By mid-morning the Financial index was already 1.04% higher, after the STOXX Europe 600 Banks index advanced 1% in early trade on Monday.

Banking shares were helped by a 2.8% rise in the share price of Barclays after Exane BNP Paribas upgraded its rating of the banking group’s share from "neutral" to "outperform".

The financial sector is also still benefiting from the Bank of England’s decision last week to cut its interest rates to record lows and implement other stimulatory measures to stave off a recession in Britain, after the country decided to break free from the European Union.

By mid-morning on Monday the rise in financial shares lifted the JSE's All-share index 0.29% higher to 52 498 points, while the Top 40 index was 0.39% stronger at 45 565 points. Resources shares were also higher in London and the local index improved by 1.19%.

The big dual-listed industrial shares are however still hampered by the strong rand, which traded at R13.65 to the dollar on Monday. With the three biggest shares on the JSE - representing a major percentage of the JSE’s market capitalisation - all lower, the Industrial index was 0.18% softer.

Before Monday’s trade the All-share index lost 2.63% over the previous seven days and is now only 1.08% higher over the past 90 days. The Top 40 index, which represents the big capitalisation shares, is however 0.95% softer over the past three months after it lost 3.18% over the previous seven days.

Analysts said expectations that other central banks might also cut their interest rates even further have improved global market sentiment. The major indices on Wall Street were back at record levels on Friday, and Asian shares reached a one-year high on Monday.

READ: Asian stocks advance to one-year high

It is also not expected that the Federal Reserve will hike US rates soon while other countries are still cutting rates, despite strong payroll data on Friday.

The US Department of Labour said July nonfarm payrolls rose by 255 000, and revised the June increase upward to 292 000. Economists polled by Reuters had forecast July payrolls would increase by 180 000 and said the data raised hopes that the world's biggest economy may have conclusively turned a corner.

Among the local banks Barclays Africa [JSE:BGA], the local subsidiary of Barclays Plc, traded 0.93% higher at R162.00 while Standard Bank [JSE:SBK] was 1.02% stronger at R146.40. FirstRand [JSE:FSR] gained 1.31% to R49.54. The top South African banks have all made strong progress over the past 30 days, with Standard Bank gaining 14.9%, FirstRand 10.28% and Barclays Africa 9.88%.

Investec [JSE:INP] was not affected by the news that the South African Reserve Bank fined the banking group’s local subsidiary R20m, after spot inspections revealed weak measures to combat money laundering and the financing of terrorism. Investec was fined for failing to properly screen some of its clients.

The share price gained 1.05% to R84.85, but in contrast with other banks is still 10.25% lower over the past 30 days.

Among the major shares the two beer giants, Anheuser-Busch InBev (AB InBev) [JSE:ANB] and SABMiller [JSE:SAB] both traded lower. SABMiller lost 0.65% to R776.18 and is now 16.14% down over the past 90 days, while AB InBev, which lost 9.87% over the past 90 days, shed 0.89% to R169.97. British American Tobacco [JSE:BTI] was 2.04% softer at R850.74.

Steinhoff [JSE:SHF] traded 1.25% higher on news that the company made another major acquisition abroad. The group said it reached an agreement to acquire American retailing group Mattress Firm for R32.8bn.

READ: Steinhoff to buy US mattress firm for almost R33 billion

The transaction will create the world’s largest multi-brand mattress retail distribution network and facilitate Steinhoff’s entry into the US market. Mattress Firm has a network of 3 500 stores and 80 distribution centres.

MTN’s [JSE:MTN] share price, which fell 9.88% over the previous seven days, lost 2.15% to R127.03 on Monday morning. The company on Friday announced it suffered a headline loss of R4.9bn, or 271 cents per share, in the six months to end-June. This compared with headline earnings of almost R12bn, or 654c/share, a year earlier.

Resources shares also followed the European markets higher, despite the news that China’s exports and imports fell more than expected in July. Imports dropped 12.5% from a year earlier, the biggest decline since February, which suggests that China's domestic demand may be faltering. Exports were 4.4% weaker year-on-year.

BHP Billiton [JSE:BIL] and Anglo American [JSE:AGL], which made strong runs in London, were both more than 2.5% higher. BHP Billiton gained 2.94% to R187.48 and Anglo 2.53% to R158.06.