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Johannesburg - Global markets recovered somewhat on Wednesday morning on perceptions that the selling over the previous four trading days on uncertainty over the UK's Brexit referendum might be slightly overdone.
The JSE followed suit, with most indices and share prices making a solid start but then moving sideways or even downwards for the rest of the morning. This resulted in indices being mostly lower by mid-morning than in earlier trade. If the intraday graphs continue with this pattern, the JSE could end up in negative territory towards the end of the day.
The All-share index opened 400 points or 0.8% higher than Tuesday’s close, but by mid-morning the index was only 0.62% stronger at 51 549 points. The Top 40 index was at one stage about 1.3% higher but by mid-morning traded only 0.52% up.
At that stage the Industrial and Resources indices were both 0.58% higher with the help of stronger European markets, but the Financial index had lost 0.22% and earlier traded 0.40% down.
All the European markets, including the London market, were higher on Wednesday as investors used the opportunity to pick up bargains among underperforming shares.
The mood was also supported by the latest betting odds from Betfair indicating the implied probability of a British vote to stay in the European Union is 62%, having fallen on Tuesday to around 55%.
Analysts however warned that Wednesday’s recovery does not mean the end of the uncertainty. British banks are planning extraordinary measures to deal with the extreme volatility in the market that is expected when the result of the referendum becomes known. The Asian markets were volatile in Wednesday morning, although most of them closed in the black.
Investors are also still pouring money into safe haven assets such as German bonds, whose yields turned negative on Wednesday morning for the first time in history. US bond yields are at a four-month low. A drop in yields means an increase in prices on strong demand.
Mining stocks were among the top performers in London and the FTSE mining index gained 2.4% in early trade after the copper price gained ahead of the US Federal Reserve's policy meeting, at which it is expected to leave interest rates unchanged.
The Fed will announce its decision on a possible interest hike on Thursday, but investors see almost no chance of rates being raised after the dismal US payrolls report for May.
Concerns over the result of the British referendum also dwarfed any optimism from solid US retail sales data published on Tuesday.
The big dual-listed commodity shares on the JSE were all higher. BHP Billiton [JSE:BIL] gained 2.30% to trade at R174.60 and Anglo American [JSE:AGL] was 2.71% higher at R134.76. Glencore [JSE:GLN] traded 3.29% stronger at R28.90.
Sanlam [JSE:SLM] recovered somewhat after it lost more than 8% over the past seven days in reaction to a trading update warning about difficult trading conditions. By mid-morning on Wednesday the share price was 0.61% higher at R59.75. Old Mutual [JSE:OML] lost 0.64% to R37.25.
Among the banks, Standard Bank [JSE:SBK] lost 1.21% to R115.75 and FirstRand [JSE:FSR] traded 0.44% softer at R42.96.
The proposed takeover of SABMiller [JSE:SAB] by Anheuser-Busch InBev [JSE:ANB] continued to be in the news, with reports that AB InBev has agreed to disinvest from Snow, the world’s biggest beer brand, in China to get approval for the transaction from the Chinese authorities.
SABMiller traded 1.04% higher at R926.88 and AB InBev, which was one of the busiest shares in terms of value, gained 1.13% to R1 9801.08.
Bidcorp’s [JSE:BID] demise continued and the share, which was unbundled from Bidvest [JSE:BVT] last month, lost 1.40% to a new low of R246.50. The share price is now more than 17% lower than the high of R304 reached shortly after the listing. The stock was listed at R270. The smaller Bidvest, which was listed at R120, traded 0.9% down at R129.79.
Naspers [JSE:NPN] traded 1.82% higher at R2 180.82 and its market capitalisation, which reached R1trn at the end of last month, is now back at R937bn.
