JSE takes breather after rate decision boost

The local market, which lagged world markets recently, made a strong recovery on Thursday but investors on Friday used the opportunity to take profits as there is still concern about the valuations of some local shares.

The JSE received a boost late on Thursday when the South African Reserve Bank decided to keep interest rates unchanged and indicated the current rising interest cycle might have reached its end.

READ: Sarb revises growth forecast to 0.4%

The All-share index closed more than 2% higher on Thursday, but by mid-morning on Friday was again 0.25% lower at 51 763 points, while the Top 40 index traded 0.19% softer at 45 223 points. All the major indices were lower at that stage.

Financial shares rallied particularly strongly on Thursday on the interest rate news, but that surge also lost its momentum on Friday and at mid-morning the Financial index was already 0.55% lower than on the previous day.

The Resources and Gold indices also dipped despite a weaker dollar, as commodity prices also took a breather after their strong run of the past few days. Oil, copper and gold all traded lower and the Resources index was 0.45% down, with the Gold index losing 0.77%.

The Reserve Bank’s interest rate announcement temporarily stopped the rand’s surge on Thursday and the local currency closed at R13.64 to the dollar last night, compared to R13.37 earlier in the day.

The weaker unit helped rand hedge shares and the Industrial index closed higher, but by mid-morning on Friday it was again 0.11% lower as the local currency started to strengthen, trading at R13.58 to the dollar.

Wall Street moved strongly on Thursday, with the Nasdaq on a record high and the Standard & Poors 500 index capping its best two-day performance in two months. However, on Friday morning Asian shares were only marginally higher and European markets opened lower as investors were taking a breather.

Analysts however think Friday’s pause is a temporary one as bond yields started to fall again, with Japanese and German bond yields in negative territory.

"Because the Federal Reserve is shying away from tightening US monetary policy, there will be liquidity sloshing around in the world's financial markets for another few months," said Tatsushi Maeno, senior strategist at Okasan Asset Management.

The Fed on Wednesday projected a less aggressive rise in US rates next year and in 2018, fanning expectations bond yields will stay low in the foreseeable future.

Standard Bank [JSE:SBK], which gained almost 4% in Thursday’s rally, on Friday morning traded 0.73% lower at R142.09. Nedbank [JSE:NED], which was almost 3% higher on Thursday, was 0.45% softer at R223.50. FirstRand [JSE:FSR] was at that stage only 0.08% down at R48.3, but Barclays Africa [JSE:BGA] lost 1.27% to R151.79

In the resources sector Anglo American [JSE:AGL] was 0.07% higher at R163.03, but BHP Billiton [JSE:BIL] lost 1.13% to R192.45. Glencore [JSE:GLN], which closed at a new 52-week high of R37.80 the previous day, shed 1.82% on Friday at R37.11. There was brisk trade in Sappi [JSE:SAP] shares and the stock was 0.34% softer at R71.04.

Sasol [JSE:SOL] was also one of the busiest shares on the JSE, but the share price gained only 0.06% to R373.81. Oil prices eased after two days of strong gains, on caution ahead of a gathering of Opec ministers next week in Algeria to discuss possible production cooperation to rein in global oversupply.

In the industrial sector Naspers [JSE:NPN] lifted 0.44%, while Mediclinic [JSE:MDC] gained 1.11% to R167.23 in brisk trade. Bidvest [JSE:BVT] was 0.40% stronger at R157.25.