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Johannesburg - Commodity shares pulled the JSE higher on Thursday, but the rest of the market was treading water as local investors await the outcome of the South African Reserve Bank’s monetary policy meeting later in the day.
By mid-morning the Financial and Industrial indices had hardly moved, following a similar pattern in Europe where the markets are also waiting for news about a European Central Bank meeting.
At that stage the All-share index was 0.38% higher at 53 040 points, while the Top 40 index had gained 0.36% to 43 366 points. The Financial index was however 0.01% lower and the Industrial index only 0.03% up.
But higher commodity prices, including oil, gave resource shares a boost, although trading was quite choppy at times. By mid-morning the Resources index was already 1.71% higher, after some dramatic swings in earlier trade.
The recovery in resources shares after two days of losses was sparked by the price of Brent crude rising to just above $47 a barrel, after weekly US government data showed crude stockpiles fell for a record ninth week and refining activity climbed to a 2016 high.
Copper rose 0.4% in London, set for its highest close since April, and zinc advanced to a 14-month high.
Commodity prices are boosted by expectations of monetary easing in most of the world’s biggest economies, which would stimulate growth and the demand for commodities. News agencies reported that the Japanese government is to compile a stimulus package of at least ¥20trn to help the economy emerge from deflation and fend off possible adverse effects arising from Brexit.
The strong dollar is however expected to put a cap on the recovery in the resources sector. The dollar index against a basket of six rival currencies is currently trading at its highest level since March 10, as it is supported by resurgent expectations of an US interest rate hike this year.
Wall Street continued to trade at record levels on Wednesday evening and Asian shares climbed to a nine-month high on Thursday, but European shares were a mixed bag in anticipation of the outcome of the ECB meeting. The central bank is expected to hold policy steady at this stage.
Investors' attention is also on China this weekend, where financial leaders from the world's biggest economies will meet to discuss the Brexit fallout and dwindling policy options to boost global growth.
Kumba Iron Ore [JSE:KIO] was again the star performer in the commodity sector, gaining 6.13% to R127.20. The share reached a 52-week high of R134.68 early last week, but has since lost more than 12% before recovering in morning trade. The share price is about 35% higher over the past 30 days and 295% over the past six months.
Anglo American [JSE:AGL], Kumba’s holding company which is also one of the more volatile shares in the resources sector, gained 4.48% to trade at R150.28. The share price lost more than 8% over the previous seven days, but is still 155% higher over the past six months.
BHP Billiton [JSE:BIL], which also lost more than 8% last week and 10% over the past 30 days, traded 2.19% higher at R177.56. BHP Billiton’s gains have been far more modest and the share is now only 10.91% higher than six months ago.
Anheuser-Busch InBev (AB InBev) [JSE:ANB] continued to make headlines in the industrial sector on news that the company won US antitrust approval for its takeover of SABMiller [JSE:SAB], after the maker of Budweiser agreed to give up ownership of the Miller brand and open the door to greater competition from craft beers. AB InBev, which lost almost 8% over the past 30 days, traded 0.43% higher at R1 780.00.
SABMiller was 0.8% stronger at R836.08 on news that net sales in the first quarter advanced 2% on an organic, constant-currency basis.
Richemont [JSE:CFR], which before Thursday’s trade was almost 20% lower over the past three months and traded at a new 52-week low on Wednesday, recovered somewhat by 2.17% to R84.78.
Shoprite [JSE:SHP], which gained more than 10% on Wednesday on stronger than expected trading results, fell victim to proifit-taking on Thursday and at mid-morning was already 2.74% lower at R189.64.
Discovery [JSE:DSY] gained 2.04% to R126.53 after the company announced that it has set up a partnership with Japan’s Sumitomo Life Insurance Company and SoftBank Group Corporation.
