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Johannesburg - The news that US the economy nearly stalled in the first quarter has wreaked havoc on Thursday on markets worldwide.
The JSE, however, managed to eke out some modest gains after two days of profit-taking, and also not all news about a stumbling US economy is necessary bad for the local market.
The apparent halt in US economic growth, which could spill over to the rest of the word, could be bad news for South African exporters, but it also means that fears that US interest rates will start rising soon have been put to rest.
If US interest rates remain on record lows for longer, it will create additional liquidity for investors in developed markets to chase higher yields in emerging markets like South Africa, where interest rates and returns are much higher.
The dollar also slipped to a two-month low on the news, which is positive for commodity prices, including gold.
By mid-morning the All-share index was 0.32% higher on 54 716 points, while the Top 40-index gained 0.32% to 48 449 points.
The possibility that US rates will stay low for longer is particular good news for the Financial index, which added 0.78%. The Industrial index gained 0.25%.
The rand was particularly strong on Thursday against the weaker dollar and traded at R11.83/$ after trading as low as R11.70/$. This is negative for resources shares and the index gave up 0.18%.
The Gold index, however, was 2.04% stronger on the weaker dollar, although the gold price was virtually unchanged at $1 205 per ounce.
The US Commerce Department said on Wednesday that the country’s economy grew at an annualised rate of 0.2% in January to February, far short of the 1.0% projected by analysts.
Later in the day the US Federal Reserve said the slowdown was due "in part" to transitory factors and expansion should continue at a "moderate pace". Analysts are however not so certain.
As expected, the Federal Reserve Open Market Committee left its key federal funds rate near zero, but after previously hinting the rate hike could come in mid-2015, the FOMC statement left the timing of an increase now open as it awaits more signs of economic progress.
Economists now think that such a hike will not be until the fourth quarter, but some even predict that rates could stay the same until early next year.
This is good news for the big dual-listed companies with interests worldwide and which are very popular with foreign investors, but the gains were very modest.
Naspers [JSE:NPN] traded only 0.37% higher on R1 900.61 and SABMiller [JSE:SAB] was only 0.02% stronger on R635.15. Steinhoff [JSE:SHF] was also 0.35% stronger on R76.75, but Richemont [JSE:CFR] lost 0.08% to R106.30.
Investors continued to take profits in Sasol [JSE:SOL] after the strong run over the past month and the share lost another 1.08% to R484.30.
Among financials there were again strong demand for Standard Bank [JSE:SBK], with 1.75 million shares worth R305m changing hands. The share traded 1.31% higher at R174.80. Old Mutual [JSE:OML] was 0.80% higher at R42.76.
In the Resources sector Kumba [JSE:KIO] lost 4.40% to R158.21 after it gained 27.1% over the last seven days owing to higher iron ore prices. Kumba’s parent company, Anglo American [JSE:AGL], was 2.41% lower on R202.49.
Glencore [JSE:GLN] lost only 0.54% to R56.76 and BHP Billiton [JSE:BIL] 0.16% to R284.40.
