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JSE gets fillip from commodities rally

Johannesburg - The JSE was stronger on Monday morning on a rally in commodity prices, sparked by comments that the worst might by over for the oil price.

By mid-morning on Monday the Resources index on the JSE was already more than 3% higher and the Gold index, also supported by a higher gold price, had gained more than 1%.

The indices also pulled the rest of the market higher. At that stage the All-share index was 1.01% up at 52 126 points, with the Top 40 index gaining 1.09% to 45 900 points. The commodity index was 3.35% stronger, the Gold index 1.19% up and the Industrial index lifted by 0.78%. The Financial index was however 0.29% softer.

The sustainability of the commodity rally is however in doubt, as fundamental conditions in the market have not changed much.

One of the reasons for the rally in commodity prices is higher steel prices in China, which boosted steel production, but the country’s vice-minister for industry said there is no improvement in the Chinese steel industry's overcapacity.

There was also more bad news for the Chinese economy after data on new lending, retail sales, industrial production and fixed-asset investment all missed economists’ estimates. The dollar also strengthened even further, normally bad news for commodity prices, after positive economic data from the US increased the possibility of a hike in US interest rates.

Investors were probably encouraged by a statement from China’s central bank, saying monetary policy would continue to support growth.

But the real trigger was the long-time bear Goldman Sachs saying the oil market has ended almost two years of oversupply, and flipped to a deficit following global oil disruptions. Brent crude oil traded 1.5% higher at $48.55 per barrel.

READ: Oil hits fresh 2016 highs on supply hopes

Supply disruptions around the world of as much as 3.75 million barrels per day (bpd) have wiped out a glut that pulled down oil prices by over 70% between 2014 and early 2016. The disruptions have now triggered a U-turn in the outlook of Goldman Sachs, which long warned of overflowing storage and another looming price crash.

Sasol’s [JSE:SOL] share price did not respond much to the better mood in the oil price, trading only 2.31% higher at R451.00. The stock has hardly moved over the past month, and is only 0.31% lower over the past 30 days and 4.13% over the past seven days.

The big dual-listed conglomerates, which dropped sharply last week, recovered strongly on improved sentiment in the commodity market. Anglo American [JSE:AGL], which lost 11.5% over the past seven days, was already 8.32% stronger at R136.20 at mid-morning.

Glencore [JSE:GLN], which gave up 9.86% of its value last week, was 4.32% higher at R29.62. BHP Billiton [JSE:BIL], which is far less volatile than the other conglomerates, gained 3.61% to R185.62 after giving up 1.25% last week.

Other commodity stocks that improved include Merafe [JSE:MRF] and South 32 [JSE:S32], which have both been improving steadily over the past month. South 32, which gained 3.95% last week, traded 4.83% higher at R19.32. Merafe was 3.30% stronger at R0.94. The share price was 3.4% higher over the past seven days and 19.5% over the past 30 days.

The platinum price improved to $1 053 per ounce on Monday, which helped Lonmin [JSE:LON] gain a substantial 14.31% to R41.30. Before Monday’s big jump, the share was already 28.8% higher over the past 30 days.

The two biggest platinum shares also gained. Anglo American Platinum [JSE:AMS] traded 3.19% stronger at R397.30 and Impala Platinum [JSE:IMP] gained 4.60% to R52.31.

Gold Fields [JSE:GFI] was the best performing gold share and added another 4.43% to R67.40, after gaining more than 10% over the previous 30 days.

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Rand - Dollar
18.99
-0.3%
Rand - Pound
24.14
-0.1%
Rand - Euro
20.64
-0.2%
Rand - Aus dollar
12.39
+0.3%
Rand - Yen
0.13
+0.5%
Platinum
913.65
-1.1%
Palladium
1,016.50
-4.6%
Gold
2,158.56
-0.1%
Silver
24.98
-0.2%
Brent Crude
86.89
+1.8%
Top 40
66,252
0.0%
All Share
72,431
0.0%
Resource 10
53,317
0.0%
Industrial 25
100,473
0.0%
Financial 15
16,622
0.0%
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