Johannesburg - The JSE followed world markets higher on Monday morning as investors bought undervalued stock after the massive sell-off of the last few weeks.
Analysts warned however that the fundamental picture for stocks has not changed much and that there must a big question mark over the sustainability of this recovery.
At one stage on Monday morning the two major indices on the JSE were both more than 2% higher, with the Financial index over 4% stronger.
At mid-morning the All-share index was 1.91% stronger at 49 516 points and the Top 40 index had gained 2.26% to 44 096 points. The Financial index was at that stage 3.82% up and the Industrial index had risen 1.63%.
The local market followed the rest of the world as Asian shares snapped a five-session losing streak on Monday and European markets continued where they left off on Friday.
Market sentiment received a boost as China's central bank fixed the yuan sharply stronger, easing fears of depreciation for now, while the oil price recovered strongly after indications that oil cartel OPEC might be willing to organise production cuts to support the price.
The Chinese market opened softer after a week-long holiday but the relative calm encouraged investors.
The latest economic news however did not support the run in share prices, suggesting that the bounce may be short-lived.
Chinese trade data was much weaker than expected, pointing to further pressure on the yuan and the potential for more capital outflows. In January exports fell 11.2% from a year earlier while imports dived 18.8%, suggesting the world's second-largest economy is still losing steam.
Japan's Nikkei index jumped 7.2%, shrugging off data that showed Japan's economy contracted more than expected in the final quarter of 2015. The Nikkei index lost 11% last week.
By midday all four major South African banks were trading more than 3% stronger. Barclays Africa [JSE:BGA] was the strongest performer and gained 4.36% to R152.89, while Nedbank [JSE:NED] was 3.92% stronger at R190.84. Standard Bank [JSE:SBK] traded 3.37% higher and FirstRand [JSE:FSR] was 3.76% up at R46.07. FirstRand was the busiest share in the financial sector in terms of volume.
The Financial 15 index lost almost a quarter of its value when it dropped from a 52-week high of 17 911 points in April last year to only 13 515 points on December 10 last year. It has since recovered almost 9% of its value, trading at 14 806 points on Monday morning.
The sharp fall in the rand was one of the reasons for the steep drop in financial shares. The rand continued its steady performance of the last few days, still trading at R15.85 to the dollar even though the greenback recovered somewhat against the yen on the back of strong US retail sales.
Commodity shares also continued their recovery, particularly those oversold stocks which rallied strongly over the past few weeks. By mid-morning the Resources index was 1.91% higher.
Kumba Iron Ore [JSE:KIO], which at one stage on Friday was more than 14% up, gained another 5.68% to trade at R52.44. Before Monday’s trade the share gained 35.8% over the past 30 days.
Anglo American’s [JSE:AGL] recovery is even more impressive, although the share price is still more than 62% lower for the past year. The stock gained another 7.88% to trade at R88.97, which means it is now almost 70% higher than the 52-week low of only R53.30 reached in January this year.
Improved sentiment on world markets was detrimental to gold’s safe haven status and the Gold index lost 5.40%. Harmony [JSE:HAR] was the top loser, trading 8.41% lower at one stage, while DRDGold [JSE:DRD] lost 6.6% and AngloGold Ashanti [JSE:ANG] was 5.76% softer.