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Johannesburg - A strong run on the London Stock Exchange pulled the JSE higher on Monday, despite the British pound’s slump to the lowest level in 31 years.
The local market was supported by the big dual-listed shares which represent about the half of the JSE’s market value; they are all listed in London and tend to track London listings higher or lower.
The financial news on Tuesday was overshadowed by the woes of the pound, which dropped to the weakest level since 1985 as the currency was hit was hit by a growing sense that the UK government may be favouring a deal with the European Union which severs links to the EU's single market in favour of total control over immigration.
READ: Pound tumbles to three-decade low
The pound’s problems were compounded by a revitalised dollar, boosted by resurgent US interest rate hike expectations after stronger-than-expected manufacturing data in the US.
The FTSE index in London however cheered the idea of a weaker pound, as it boosts exports. The majority of companies listed on the FTSE 100 index earn most of their income outside Britain, and therefore make more money if the pound is under pressure. By mid-morning the index was more than 1% higher.
The prospect of higher US interest rates could be bad news for the JSE as it means that some of the investments searching higher yields in emerging markets could flow back to the US, but investors were following the European markets higher on Tuesday.
By mid-morning the All-share index was already 0.78% stronger at 52 068 points, while the Top 40 index traded 0.89% higher at 45 510 points. The Industrial index - which includes giants like Naspers [JSE:NPN], Richemont [JSE:CFR] and British American Tobacco [JSE:BTI] - at mid-morning was 0.51% higher.
The big dual-listed commodity shares also supported the local Resources index which gained 1.01%, with Anglo American [JSE:AGL] surging ahead to yet another 52-week high.
Financial shares firmed 1.23% in response to Deutsche Bank gaining more than 3% in London, after the German banking group’s share price was under pressure lately. There is concern that Deutsche Bank’s spat with the US authorities, which slapped a fine of $14bn on the banking group after it miss-sold home loan securities in the US, could threaten the banking system’s stability, but it seems that most of the bad news is already discounted.
This week the market’s attention will be again be on the latest US economic data, after an index of US national factory activity rose to 51.5 in September from 49.4 in August, indicating that the sector is now expanding. The main economic indicator this week is Friday's non-farm payrolls report. Employers are expected to have added 170 000 jobs in September, according to the median estimate of 59 economists polled by Reuters.
Futures markets are now pricing in a more than 60% possibility that the US Federal Reserve will hike interest rates before the end of the year.
Such an increase will boost the dollar to the detriment of the rand, which remained stable at R16.62 to the dollar on Tuesday. However, a weaker rand is not necessarily bad news for the big rand hedge shares, which derive most of their income abroad and earn more if the rand is weak.
The four biggest shares on the JSE all traded higher. Naspers gained 0.67% to R2 348.39 and British American Tobacco traded 1.33% higher at R881.58. Richemont was 0.36% stronger at R83.08.
Anheuser-Busch InBev [JSE:ANB], by far the biggest share on the JSE, at mid-morning was 0.67% higher at R1 775.99. Steinhoff [JSE:SHF], which is also listed in Frankfurt in Germany, was 0.53% stronger at R78.01.
Anglo American, which was as low as R53.30 in January this year, was 2.63% higher on a new 52-week high of R178.20. Before Tuesday’s trade it was already 167.5% higher for the year to date. Glencore [JSE:GLN] gained 0.92% to R38.28.
Among the banks Barclays Africa [JSE:BGA] gained 1.82% to R153.75, Standard Bank [JSE:SBK] was 1.26% higher at R143.76 and FirstRand [JSE:FSR] traded 0.55% stronger at R47.27.
