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Johannesburg - Share prices on the JSE took a breather on Friday morning with the two major indices about 0.40% lower by midmorning.
This was mainly due to some profit taking after the strong run of the previous three days, as there was no negative news to push share prices down.
European markets were also more subdued on Friday, but were still marginally higher as share prices are still supported by an extra-ordinary demand for bonds which pushed yields to record lows. By midmorning the FTSE 100-index in London was only 0.26% higher, the Dax-index in Frankfurt 0.07% higher and the CAC 40-index in Paris 0.04% softer.
The All-share index on the JSE was at midday 0.44% lower on 51 988 points and the Top 40-index traded 0.58% softer on 45 730 points. The big losers were financial shares which lost 1.59%, with local banks dropping sharply after a strong run the previous few days. The industrial index lost 0.48%.
Gold shares received a boost from a higher gold price which gained almost 1% to $1 332.60 and the gold index traded 4.05% higher with the resources index 0.72% stronger.
Local bonds were supported by the news that last month’s trade surplus was bigger-than-expected at R18.73bn in May, after April’s R127m shortfall.
Thursday’s trade data augurs well for South Africa’s current account, which has traditionally been a source of vulnerability for the rand and widened to 5% of gross domestic product (GDP) in the first quarter of the year.
“Recent trends suggest a much lower current account deficit than the consensus is forecasting, which could help support the rand,” Nedbank analysts Isaac Matshego and Dennis Dykes said in a note. It would also mean that local interest rates may not have to rise soon. By midmorning the rand was trading at R14.75 to the dollar.
Although there is still a lot of uncertainty on how Britain’s exit from the European Union will be managed, European share prices are remarkably resilient. Shares are supported by the prospect of further cuts in interest rates and strong bond-buying to support a fractured global economy. U.S. and European government bond yields are at their lowest in years.
The 10-year US Treasury yield is at its lowest in four years, within striking distance of record lows. French and Dutch equivalents are also at all-time lows and those Europe's struggling southern states were around their lowest in a year.
The fall in yields came largely thanks to a Bloomberg report that the European Central Bank was considering looser rules for bond-buying.
Among the local banks Barclays Africa [JSE:BGA] traded 4.22% softer on R138.00 and FirstRand [JSE:FSR] was 3.21% lower on R43.40. Standard Bank [JSE:SBK] lost 2.70% lower on R124.35.
The financial shares that are also listed in London performed better. Old Mutual [JSE:OML] lost only 0.42% to R38.29 and Investec Plc [JSE:INP] only 0.43% to R89.60.
In the industrial sector Naspers [JSE:NPN] lost 2.39% to R2 186.42, but SABMiler [JSE:SAB] was 0.56% stronger on R852.39 after the proposed take-over by Anheuser Busch ABInBev of SABMiller received the green light from the South African competition authorities.
The top performers in the gold sector were Sibanye [JSE:SGL] which traded 5.38% higher on R53.04 and Gold Fields [JSE:GFI] which reached yet another 52 week high. By midmorning on Friday its share price was 5.07% higher on R74.88.
