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Johannesburg - More risk appetite for shares, which pushed global markets higher on Tuesday morning, also gave the JSE strong support with all the major indices higher by mid-morning.
The rand also strengthened to below the psychological barrier on the back of a softer dollar as the prospect of an imminent rise in US rates diminished substantially.
By mid-morning the All-share index traded 0.48% higher at 54 299 points and the Top 40 Index had gained 0.42% to 48 022 points. However, both indices moved sideways for most of the morning after strong openings.
There was support on a wide front as the Financial index traded 0.30% higher and the Industrial index, the big loser on Monday, gained 0.59%. Resources shares were also higher, with the Gold index gaining 0.58% and the Resources index 0.49% up.
There were fears that higher US interest rates could lead to an outflow from emerging markets, where investors were chasing higher yields, back to the US where risks are perceived to be lower.
This possibility was however put on the back burner when the poorest US jobs data in six years was announced on Friday.
US Federal Reserve chair Janet Yellen said on Monday night that last month's jobs report was "disappointing", but warned against attaching too much significance to the payrolls data in isolation.
She was however careful not to give any hints about the timing of a next rate increase in contrast to a speech on May 27, when she said such a move would probably be appropriate "in coming months". Her comments were interpreted by market players around the world as a sign that the Fed is now in no rush to raise interest rates.
The US futures market is now discounting a possibility of only 2% that US rates will be hiked in June and the possibility of an increase in July is now only 22%.
The S&P 500 Index on Wall Street climbed towards a record on Monday. Asian markets were mostly higher and European markets gained the most in two weeks on Tuesday, supporting the dual- listed shares on the JSE. MSC’s global index is set to close at its strongest level since April 21 on Tuesday.
Yellen’s comments also put the dollar under pressure, boosting commodity prices and shares and helping the rand to reach a level of R14.90 to the dollar, a gain of more than 5% since Friday.
The announcement by Standard & Poor's last Friday that South Africa’s credit rating would stay the same for now also contributed to the stronger rand. Rating agency Fitch is expected to follow the lead of Moody’s and S&P in not lowering South Africa’s credit rating, but also changing the future prospects for the rating to negative, indicating that South Africa is not out of the woods yet. Fitch’s announcement will be made on Wednesday.
The mood on the markets was supported by the higher oil price, also a result of the weaker dollar with Brent crude again trading above $50 per barrel. The market was also reacting to the Baker Hughes weekly North American rig count that showed an increase of nine onshore oil drilling platforms in the US.
The higher oil price however did nothing for Sasol [JSE:SOL], which lost more than 10% on Monday in reaction to a warning that the group’s earnings could be as much as 30% lower than the previous year due to lower oil and gas prices. By mid-morning the share price was 0.03% softer at R432.37.
The star performer in the industrial sector was Naspers [JSE:NPN], which at mid-morning was 0.74% higher at R2 311.90. This equalled the all-time high set last week, which pushed the group’s market level to beyond R1trn. SABMiller [JSE:SAB], which was also sharply lower on Monday, traded only 0.24% higher at R93.57.
Telkom [JSE:TKG], which gained more than 8% on Monday despite a sharp drop in earnings, traded 2.31% higher at R66.50. Investors seem happy with the progress of the group’s turnaround programme. Vodacom [JSE:VOD] traded 0.53% higher at an all-time high of R170.35.
Commodity shares continue to do well in London, which supported local prices. BHP Billiton [JSE:BIL] at mid-morning was 1.93% higher at R194.60 and Anglo American [JSE:AGL] had gained 1.24% to R149.78.
The best performers in the commodity sector were the iron ore producers Kumba [JSE:KIO] and Assore [JSE:ASR]. Kumba at mid-morning traded 5.29% higher at R89.64, and Assore was 4.85% stronger at R117.71
Retail shares continue to be in strong demand and Clicks [JSE:CLS] traded at a new all-time high of R115.17 on Tuesday, 1.92% higher than the previous day. Shoprite [JSE:SHP] jumped more than 2% to reach an intraday 52-week high of R179.07, but then lost ground and at mid-morning traded 0.12% lower at R175.68. Mr Price [JSE:MRP] was 2.14% stronger at R208.82.
