Markets WRAP: Rand closes at R14.30/$

The rand closed at R14.30 to the greenback on Thursday afternoon.

The day's range was between R14.19 and R14.35.

All eyes will now be on President Cyril Ramaphosa's State of the Nation Address later tonight.

Oil rose after Iran said it shot down a U.S. spy drone in its airspace, stoking Middle East tensions further after the attack on two tankers last week, while a more dovish stance from the Federal Reserve lifted financial markets. Futures climbed as much as 4.6% in New York.

The reported drone downing follows a missile strike by Yemeni rebels overnight on Saudi Arabia. The Fed’s readiness to lower interest rates for the first time since 2008 boosted stock markets and weakened the dollar, spurring demand for commodities priced in the U.S. currency.

Oil also gained after U.S. government data showed inventories declined by 3.1 million barrels last week, more than analysts had estimated. - (Bloomberg)

A Naspers [JSE:NPN] start-up fund has announced its first investment of R30m in online cleaning services platform SweepSouth.

The investment was announced by Naspers Foundry, a R1.4bn start-up fund aimed at boosting the South African technology sector, on Thursday.

The Competition Commission has approved, with conditions, a proposed merger that will see Ericsson acquiring Kathrein SE.

Ericsson is a global supplier of network equipment and software, while the antenna and filter products business is controlled by Kathrein. In South Africa, Kathrein sells to a local sales partner and all sales to SA customers are indirect.

In a statement, the Commission said the proposed transaction was "unlikely to result in a substantial prevention or lessening of competition in any relevant market". However, it said, the Commission found that the proposed transaction was "likely to raise substantial public interest concern with regard to its effect on the ability of small business or firms controlled by historically disadvantaged persons to become competitive".

This is due to the fact that the merged entity would prematurely terminate a distribution agreement with an SA sales partner currently being used by Kathrein, it said.

The commission, Kathrein and Ericsson agreed that following the merger, the merged entity would not terminate the distribution agreement, instead letting it run for its remaining duration, the statement said. All restrictions imposed on the sales partner would also be removed, it added.

Gold stocks on the JSE set pace for best year since 2005

John Viljoen

It’s only June, but gold stocks on the JSE are already heading for their best year since 2005.

A South African index of bullion producers jumped as much as 6% on Thursday morning, stretching its year-to-date gain to 40%.

Gold surged to the highest in more than five years after the US Federal Reserve on Wednesday indicated a readiness to cut interest rates.

The precious metal has rallied since late May as investors seek havens amid slowing global growth due to the fallout from the US-China trade dispute and as central banks adopt a more dovish tone.

A report that Iran shot down a US drone added to Middle East geopolitical tensions - and to bullion’s allure.

Gold Fields is the best-performing JSE gold stock, up 55% in 2019.

The rally has pushed the sector index close to technically overbought territory, with its 14-day relative strength index rising above 70, a level that suggests gains may be overdone, in all but three of the past 14 sessions.

Treasuries extended gains, while Asian stocks climbed with US and European equity futures after the Federal Reserve struck a dovish tone in its latest policy statement. The dollar weakened against all major peers and gold climbed to its highest level since 2013. The 10-year Treasury yield dropped below 2% to its lowest since November 2016.

Stocks surged in China ahead of FTSE Russell index changes next week and saw more modest gains in Tokyo, Hong Kong and Seoul. Earlier, the S&P 500 Index closed higher after the Fed indicated an increased readiness to cut interest rates. The Bank of Japan offered no brake for the yen’s advance, keeping rates unchanged and offering no further signal of easing. Two-year note yield tumbles as Fed turns dovish. Seven of 17 Federal Reserve officials now think it will be appropriate to lower the benchmark overnight rate by a half-percentage point by the end of the year, according to updated projections published Wednesday. The Fed cited “uncertainties” in the outlook that have increased the case for a rate reduction as officials seek to prolong the near-record US economic expansion.

"This was a more dovish result than many had expected," Tiffany Wilding, US economist at Pacific Investment Management, told Bloomberg TV. "When you have heightened uncertainty and potential trade-policy shocks at a time when the economy is already in a fragile state, it makes sense for the Federal Reserve from a risk management perspective to really guide toward interest-rate cuts if they are needed."

Bond traders are virtually certain that the Fed will ease policy as soon as next month. The rate implied for the July 31 Fed decision dropped by 7 basis points to about 2.06%. That suggests about 31 basis points of rate cuts by then. The January 2020 fed funds futures contract implies close to 75 basis points of easing by the end of 2019.

Meanwhile, the Bank of Japan kept monetary policy unchanged Thursday, maintaining its interest rates and asset purchases, it said in a statement. All 50 economists surveyed by Bloomberg had predicted no change. Elsewhere, oil recovered to trade above $55 a barrel after a report showing a decline in US crude supplies and record gasoline consumption and OPEC and its allies agreed an early July date to discuss extending production cuts. A report that Iran shot down a US drone added to Middle East geopolitical tensions.

These are the main moves in markets:

Stocks

The MSCI Asia Pacific Index rose 1.1% as of 15:21 in Tokyo. S&P 500 Index futures rose 0.4%. The S&P 500 Index closed up 0.3%. Euro Stoxx 50 futures gained 0.4%.

Currencies

The yen rose 0.5% to 107.53 per dollar.The offshore yuan rose 0.4% to 6.8668 per dollar. The Bloomberg Dollar Spot Index declined 0.5%, the most since March. The euro bought $1.1280 up 0.5%.

Bonds

The yield on 10-year Treasuries fell about four basis points to 1.98%.

Commodities

West Texas Intermediate rose 2.8% to $55.49 a barrel. Gold rose 1.9% to $1,386.16 an ounce. - Bloomberg