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Johannesburg - The JSE was again supported by the global rally in financial markets on Tuesday morning, but the local market did so with far less enthusiasm than the rest of the world.
Even the commodities index, which gained strongly on Monday on the worldwide rally in commodity prices, was less than 1% higher at mid-morning on Tuesday. Some profit-taking, as well as concerns on the sustainability of the rally, seem to have put a damper on the JSE.
Elsewhere in the world, markets were moving strongly on news that the oil price is at a six-month high and fast approaching $50 per ounce as supply disruptions prompted long-time bear Goldman Sachs to issue a bullish assessment on near-term prices.
A combination of Nigerian, Venezuelan and other outages, declining US production and virtually frozen inflows of Canadian crude after wildfires in Alberta's oil sands region all helped to lift oil prices.
At mid-morning Brent crude traded at $48.92 per barrel, after breaching $49 in earlier trade.
Global share prices were also supported by Apple’s biggest rise in two months after Warren Buffett's Berkshire Hathaway reported taking a stake of about $1bn in the iPhone maker. Apple shares had lost about one-fifth of their value in the past month on worries about the company's slowing sales growth.
The mood was however far more subdued on the JSE, and the All-share index was only 0.30% higher at 52 568 points at mid-morning while the Top 40 index gained 0.46% to 46 489 points.
This was mainly due to a rise of 0.86% in the commodities index and a 0.34% increase in the Industrial index, with financial shares 0.16% down and gold 0.70% lower.
Sasol [JSE:SOL], the South African company which benefited mostl from improved sentiment in the oil market, was however only 0.34% higher at R455.50 and gained only 2.47% over the past seven days.
Commentators in the US have warned against over-optimism on the oil price as shale oil producers, who have stopped production because of the low oil price, can easily start producing again if the oil price stays at current levels - leading yet again to an oversupply.
BHP Billiton [JSE:BIL], which is the other JSE-listed company with interests in the oil market, traded 1.97% higher at R193.23. Anglo American [JSE:AGL] was 3.31% higher at R141.69.
Lonmin [JSE:LON] continued to be one of the better-performing commodity shares. The share traded 3.12% higher at R44.96 after gaining 21.4% over the past seven days and 60.24% over the past month. On Tuesday morning the company announced major progress with its efforts to reduce operating unit costs and capital expenditure, while at the same time reducing overall production.
The company posted earnings before interest, tax, depreciation, and amortisation of $36m for the six months to end-March. Earnings per share were still at a loss of 1.8 US cents per share, but this is a considerable improvement on the loss of $1.64/share for the first half of 2015.
The rest of the platinum sector was a mixed bag, with Anglo American Platinum [JSE:AMS] losing 1.65% to R395.82 but Impala Platinum [JSE:IMP] trading 3.78% higher at R54.10.
ArcelorMittal [JSE:ACL], which gained 6.44% over the last week, was the victim of profit-taking. The share price gained from higher steel prices and production in the Chinese steel market, but the Chinese government said there is still overcapacity in the industry.
Chinese President Xi Jinping however vowed on Tuesday morning to press ahead with plans to cut overcapacity at state-owned enterprises, which is positive news.
Vodacom [JSE:VOD] traded 1.62% higher at R162.27 after announcing solid results for the full year to end-March, although investors were disappointed about the dividend. Customer numbers are up, service revenue is growing healthily and data continues to drive growth.
And, despite a decline in international subscriber numbers thanks to registration requirements in the Democratic Republic of Congo and Mozambique, operations outside SA look to be in equally good health.
MTN [JSE:MTN] was only 0.24% stronger at R126.50 and its market capitalisation of R232bn is still trailing Vodacom’s R238bn.
Netcare [JSE:NTC], which lost more than 8% on Monday on the back of disappointing interim results, was only 0.31% lower at R32.44 after losing more than 3% in earlier trade.
Although Netcare’s revenue grew by 15% and earnings by 11%, it was mainly due to the weak rand. Excluding the impact of the rand, group revenue would have grown by just 3.6%. The company however on Tuesday said extensive waiting lists for the UK’s taxpayer-funded National Health Service are going to continue driving patients to BMI Healthcare, the country’s largest private hospital group in which Netcare holds the majority stake.
