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Johannesburg - The global rally in share prices, sparked by Wall Street's Dow Jones index breaching 20 000 points for the first time on Wednesday evening, lifted financial and industrial shares on the JSE on Thursday morning.
The JSE was however not as exuberant as its global peers, as the strong rand continued to put a cap on the prices of the dual-listed shares which represent more than half of the JSE’s market value.
Profit-taking in the resources sector, which stopped the rally in these shares in its tracks on Wednesday, also continued on Thursday and at mid-morning the sector was already 1.80% lower than the previous close.
The result was that the All-share index at mid-morning was only 0.02% higher at 53 264 points, while the Top 40 index traded 0.02% softer at 46 356 points.
One of the strong performers was the financial sector, which normally rallies when the rand is firm. The initial recovery however fizzled out and by mid-morning the Financial index was only 0.58% higher. The local currency traded at R13.24 to the dollar by midday, the strongest in months, as concerns about US President Donald Trump's protectionist stance kept the dollar on the defensive.
"The problem that the dollar is having right now is two fold - first Trump has been talking down the currency and second, his protectionist policies make foreign investors nervous," wrote Kathy Lien, managing director of FX strategy for BK Asset Management.
A strong rand is particularly detrimental to the dual-listed shares, as it means they are more expensive in rand.
The Industrial index on the JSE, which normally follows the European markets higher when the dual-listed shares rise in Europe, was therefore only 0.58% up by mid-morning.
The Wall Street rally was sparked by Trump’s early moves on infrastructure and deregulation, which have reignited investor confidence in the US economy, propelling stocks into record territory.
The broader S&P 500 benchmark also hit new highs, helped by rallies in economically sensitive sectors directly affected by Trump’s first executive actions, including requiring that domestic steel be used for US pipelines and building a wall along the Mexican border.
But these measures and the weaker dollar did not do much for commodity prices, which are still consolidating after a strong rally recently.
Gold was on track for a third straight day of losses as the risk-on mood in global markets reduced demand for the precious metal. Spot gold was down 0.15% at $1 197.96 an ounce, down from a two-month high of $1 219.59 scaled on Tuesday.
The Gold index lost 1.77% with AngloGold [JSE:ANG] trading 1.47% lower at R160.50 and Sibanye [JSE:SGL] 0.71% softer at R27.81.
Kumba [JSE:KIO], which gained more than 9% on Wednesday after a trading statement that headline earnings per share for the year to end-December would likely be between 123% and 125% higher than a year ago, at mid-morning was 3.29% higher at R198.04. In early trade the stock was more than 7% stronger at R207.98.
The share price gained more than 496% over the past year after reaching a 52-week low of R32.17 in January last year.
BHP Billiton [JSE:BIL] lost 1.83% to R240.49 and Anglo American [JSE:AGL] was 1.61% softer at R226.21. Glencore [JSE:GLN] was 0.91% lower at R54.14.
Naspers [JSE:NPN] gained 1.15% to R2 160.00 and British American Tobacco [JSE:BTI] was 1.4% stronger at R821.72. Richemont [JSE:CFR] was however 0.30% softer at R103.83.
FirstRand [JSE:FSR] was the busiest share in the financial sector and traded 1.10% higher at R53.30. Sanlam [JSE:SLM], which on Wednesday announced its acquisition of a controlling stake in life assurer Bright Rock, was 1.12% stronger at R66.77.
