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JSE up as resources rally cheers market

Mar 13 2017 13:25
David van Rooyen

Johannesburg - Some resources shares on the JSE which dropped sharply over the past week recovered strongly on Monday morning, in reaction to first signs that the commodity prices drop has reached a turning point.

Shares like Kumba [JSE:KIO] and some platinum and gold shares made big gains in early trade on Monday morning, and by mid-morning the Resources and Gold indices were substantially higher.

With not much happening on the rest of the market, those gains were good enough to pull the All-share and Top 40 indices higher.

The improvement in commodity prices was the result of a softer dollar, as the currency market has already priced in an interest rate hike this week by the Federal Reserve after a strong jobs report on Friday. The dollar also lost ground against the euro, which touched a one-month high against the greenback after some European Central Bank policymakers raised the possibility of hiking interest rates before bond purchases end.

A weaker dollar is good for commodity prices, as it makes commodities cheaper in other currencies.

By mid-morning the Resources index was already 1.32% higher and the Gold index had gained 3.14%. The result was that the All-share index was 0.44% higher at 51 493 points and the Top 40-index was also 0.44% up at 44 499 points. The Industrial index was 0.32% firmer and the Financial index 0.14% lower.

Copper is usually the leading indicator in the resources market and copper futures in London rose the most in three weeks on Monday, propped by the softer dollar. There are also concerns about supply disruption following an indefinite workers' strike at Peru's top copper mine. Workers at Freeport-McMoRan's Cerro Verde in Peru started an indefinite strike on Friday that halted output of about 40 000 tonnes per month.

At BHP Billiton's [JSE:BIL] Escondida copper mine in Chile, the world's largest, the striking union said on Saturday it will not accept the company's offer to return to the negotiating table, and called on BHP to clarify its negotiating positions.

The higher copper price also pulled other commodity prices higher. Anglo American [JSE:AGL], the biggest loser over the previous week, gained 2.53% to R190.20. The share lost more than 10% over the previous seven days and more than 19% over the previous 30 days. As recently as January 22, it traded at a 52-week high of R235.14.

Anglo was also the busiest share on the JSE in terms of value, with1.8 million shares sold for more than R355m.

BHP Billiton  gained only 0.86% to R204.30 and Glencore [JSE:GLN] was 0.75% stronger at R50.96.

Kumba, which lost more than 13% of its value over the previous week, was more than 6% higher in early trade  at R196.50. It gave up some of those gains and at mid-morning was 3.80% stronger at R192.22. Kumba was on a 52-week high of R225.50 on February 12.

The platinum price did not move much but all platinum shares were higher after recent big losses, after the platinum price dropped from $1 033 per ounce on February 27 to the recent level of $944.00/oz.

Impala Platinum [JSE:IMP], which is currently more than 40% lower than six months ago, gained 4.84% in busy trade to R41.20.The share lost more than 10% over the previous seven days and more than 24% over the previous 30 days. Anglo American Platinum [JSE:AMS], which also started the day more than 10% lower than a week ago, gained 2.94% to R288.51.

Northam [JSE:NMS] and Royal Bafokeng Platinum [JSE:RBP], two of the biggest losers last week, also recovered strongly. Norham gained 5.72% after shedding 13.5% last week and Royal Bafokeng Platinum was 3.39% stronger at R32.59, after the share lost almost 15% of its value last week.

Harmony [JSE:HAR] was the best performing gold share, gaining 4.05% to R28.78 in response to news that the gold price gained 0.94% to $1 209.14. The Gold index lost more than 20% over the past month mainly due to the strong rand, as the gold price was 0.46% higher over that period. The rand traded at R13.11 to the dollar on Monday, compared with R12.86 on February 22 this year.

equities  |  jse  |  markets
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