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The local market moved particularly decisively on Thursday morning and at midday the All-share index was already 1.58% higher at 48 679 points.
It now seems possible that the JSE can end the first month of 2016 in the black after the All-share index was more than 6% down earlier in the month, the worst start to a new year in a long time. Before the day’s trade started, the All-share was only 0.30% lower over the past 30 days, a deficit which was quickly wiped out on Thursday morning.
The All-share performed strongly this week, despite some up and downs, and at midday was already about 3% higher for the week. It started the week at 47 211 points.
Thursday morning’s rally, which was supported by indications that the Federal Reserve might be thinking twice about increasing US interest rates, was broad-based and at midday the Top 40 index was 1.77% higher at 43 697 points.
The Resources index traded 2.74% higher, the Financial index was short on its heels with gains of 2.67% and the Industrial index improved by 1.19%.
The Gold index, which rallied spectacularly earlier in the week, retreated somewhat and was 1.42% lower at midday. The gold price fell for the first time in four days after a rally to the highest level in almost three months as investors assessed the outlook for US monetary policy.
Although the Federal Reserve did not scrap the possibility of another hike in US interest rates at its meeting in March, it said after its meeting this week it is keeping a close eye on developments in the volatile global economy.
The initial reaction to the Fed’s statement was negative with share prices on Wall Street falling, as investors were apparently frustrated that the central bank was not concerned enough about the global outlook to scale back its plans for policy tightening.
"However, as cooler heads prevailed and analysis began to circulate, the statement did actually show a noticeable dovish tilt to it,” Angus Nicholson, market analyst at IG, wrote in a note.
Asian markets were slightly higher in choppy trade and the European markets delivered a mixed bag, with some markets slightly higher and others losing ground.
A more dovish approach by the Fed is good news for emerging markets such as South Africa, as it can lead to a slowdown in the current outflow of foreign capital to markets where the risks are perceived to be much lower, but the returns are also very low if interest rates do not rise.
The Fed’s statement hit the dollar, which was good for resources shares, and the rand also strengthened, which supported financial shares. By midday the currency traded at only R16.30 to the dollar. The unit is already discounting a hike of 50 basis points in local interest rates, when the South African Reserve Bank’s latest interest rate decision is announced later in the day.
Anglo American [JSE:AGL] was the best performer among the dual-listed commodity groups and gained 11.29% to R64.55. This is much more than BHP Billiton [JSE:BIL], which gained 3.01% to R156.98, and Glencore [JSE:GLN], which traded 2.30% stronger at R21.82. Locally listed conglomerate African Rainbow Minerals [JSE:ARI] gained 1.73% to R52.52. Before Thursday’s trade, the share was 41.05% stronger over the past seven days.
With gold shares losing ground, investors turned to platinum on Thursday and the two biggest shares in the sector made spectacular gains. Impala Platinum [JSE:IMP] was 12.50% higher at midday at R30.50 and Anglo American Platinum [JSE:AMS] gained 1.30% to R222.60.
Sibanye Gold [JSE:SGL], South African’s biggest gold producer, did not drop in line with the rest of the sector. At midday the share was 1.30% higher on a new 52-week high of R37.34. The company will soon be exposed to the platinum sector, when it acquires Anglo American Platinum’s Rustenburg mines.
FirstRand [JSE:FSR] was the busiest share in the financial sector and traded 3.42% stronger at R41.98.
MTN [JSE:MTN] was another 2.83% stronger at R128.83 after it gained almost 5% over the previous seven days. The market is encouraged by indications that Nigeria is open to an amicable out-of-court settlement with MTN over a $3.9bn fine imposed on the cellphone operator.
