JSE slips on firmer rand

May 11 2017 17:58
Martin Harris, Trading desk at EasyEquities

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Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA

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Cape Town – The JSE slipped as the rand firmed to R13.38 to the greenback on Thursday, following weaker dollar prices.  The only winning index on the market belonged to the gold miners, which have bounced off their lows due to a firmer gold price. 

The blue-chip Top 40 traded 0.31% weaker, followed by the broader All Share Index which traded 0.26% lower.  Markets were dragged down by Resources slipping 1%, Financials 0.56% and Industrials 0.20%, whilst gold miners closed 2.21% in the green.

South African packaging and paper company Mondi released mixed results for the first quarter of the year.  Mondi Plc [JSE:MNP] dropped 2.2%, while Mondi TDP [JSE:MND] fell 2.39% after strong sales volume was offset by lower margins and asset values, seeing profit drop 6% year on year.

Gold was able recover off a support level at $1215 and to inch up to $1225/Oz, after a fall in the US dollar.  The receding risk aversion in Europe and the potential for rising interest rates in the United States has capped the demand for the safe-haven recently.  Market consensus is that the Fed should be hiking rates here more times this year, with gold sensitive to the rising interest rates, which lift the opportunity cost of holding non-yielding assets such as gold bullion, whilst enhancing the dollar.

Brent Crude rose another 1.7% to $51.06/bbl, the rally has reversed all last week’s losses and could spell further petrol price increases in South Africa.  Opec had agreed to cut output by 1.8 million barrels per day for the first half of the year and are currently in negotiations to extend the agreement. 

The higher oil prices have reinforced expectations that the European Central Bank could taper its expansionary monetary policy, as the markets are set for a lower risk environment following the result of the French election and Brexit negotiations in the court of the Europeans. 

In the US; weekly jobless filings fell, and producer prices rebounded strongly – supporting the Federal Reserve’s indicators to raise rates.  The US central bank increased its benchmark overnight interest rate by 25 basis points in March and has forecast two more rate hikes this year. The economy created 211 000 job in April after adding only 79 000 positions in March.

*This report is from the Trading Desk at EasyEquities, Fin24's latest content partner on equities and market moves.

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