Johannesburg - Politics was in the background on Monday and the rand strengthened significantly against the weakening dollar, with positive results for resources and gold shares on the JSE. It was however not such good news for financial and industrial shares, and the major indices were only marginally higher by mid-morning.
At that stage the rand traded at R14.39 to the dollar, almost 1.34% higher than the previous close, after the dollar lost ground on assumptions that the Federal Reserve won't raise US interest rates this month after a weaker-than-expected jobs report.
Markets around the world rallied on the weaker jobs data, with European markets the highest in four months and the Nikkei index at its best levels in three months. Emerging markets also rallied strongly.
The dollar lost ground which gave resources and gold shares on the JSE a strong boost. By mid-morning the Resources index was already 1.15% higher and the gold index 1.28% stronger.
The Industrial index, which represents the biggest shares on the JSE, was however 0.05% lower due to the strong rand. The biggest shares in the Industrial index earn most of their income abroad, which means that local investors' return is weaker if the rand strengthens.
The stronger rand also put pressure on the Financial index, which traded 0.28% lower. The All-share index at mid-morning was only 0.11% higher at 53 557 points, while the Top 40 index gained 0.11% to 47 024 points.
Friday's US jobs report showed nonfarm payrolls rose by 151 000 jobs in August after an upwardly revised 275 000 increase in July. Economists polled by Reuters had expected a rise of 180 000.
That gave investors hope that the first hike interest rate hike in the US will only be in December, despite comments from Jeffrey Lacker, president of the Federal Reserve in Richmond, that the US economy appears strong enough to warrant significantly higher interest rates.
The US futures market is now pricing in a chance of about 20% for a September hike and a more than a 60% chance by the end of the year.
Markets were also keeping watch on the two-day summit of leaders from G20 nations in Hangzhou, China. President Jacob Zuma and Finance Minister Pravin Gordhan are both in China at the meeting, which moved the political spat between the two to the background for a day or two.
The attention is also on the European Central Bank’s interest rate decision on Thursday. Most economists expect the bank to hold policy steady, though some believe the ECB could extend its asset buying programme.
Kumba [JSE:KIO] was one of the top performers in the resources sector and traded 3.68% higher at R138.93, while its holding company, Anglo American [JSE:AGL], was 2.62% stronger at R158.80. BHP Billiton [JSE:BIL] gained 1.78% to R199.40 and Glencore [JSE:GLN] 1.46% to R35.55.
South 32 [JSE:S32], which was unbundled from BHP Billiton at the beginning of the year, gained 2.56% to trade at a new all-time high of R22.56. Last month the company announced a 76% earnings drop due to lower commodity prices, but the market was impressed with its cash management and cost cutting.
The company transformed net debt of $402m to a net cash position of $312m, and reduced controllable cost by R386m. Capital expenditure was reduced by 39% to $383m. The share price gained 12.4% over the past 30 days and more than 20% over the past 90 days.
South 32 and Glencore will be included in the Top 40 index for the first time from September 16.
The top gold shares were Harmony [JSE:HAR], which gained 3.67% to R56.71, and DRDGold [JSE:DRD], which at mid-morning was 4.02% stronger at R8.03.
Naspers [JSE:NPN] continued its strong upward momentum in the industrial sector and was 1.18% higher at a new all-time high of R2 520.24, but British American Tobacco [JSE:BTI] lost 1.59% to R918.50. SABMiller [JSE:SAB] was 0.69% softer at R842.45.
Barclays Africa [JSE:BGA] lost 0.24% to R148.29 after Reuters reported that plans by the Public Investment Corporation to form a group made up of black shareholders to buy a stake in the group are being hindered because South African investors are struggling to raise financing, according to people familiar with the matter.
Dubai-based Abraaj Group was also planning a separate bid, but it has lost interest and is no longer in talks with Barclays.