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Johannesburg - Resources and gold shares, which both lost almost 5% over the previous seven days, recovered on Tuesday morning on the JSE and that enabled the major indices to be marginally in the black by midmorning.
Industrial and financial shares hardly moved in line with caution on global markets as investors are getting nervous that the expected monetary policy easing by major central banks, which has already been discounted by the market, might not meet expectations.
The oil price rebounded from over three-month lows on Tuesday, lifted by a drop in the dollar, and it also pulled other commodities higher.
The result was that the resources index gained 1.74% by midmorning, while the gold index improved by 2.94%. At that stage the All-share index was only 0.31% higher on 53 456 points, while the Top 40-index gained 0.21% to 46 640 points, as the industrial and financial indices were almost unchanged.
Traders said the higher commodity prices were partly a correction after the previous day's sharp falls, but it also reflected a 1% fall in the dollar against the Japanese yen ahead of the US Federal Reserve's two-day policy meeting that begins later on Tuesday.
As most commodities are traded in dollars, a drop in its value makes them cheaper for countries using other currencies, potentially spurring demand.
Analysts warned, however, that concerns of ongoing oversupply weighed on markets, particularly oil, and many traders are raising their bets on further price falls. Brent crude oil, which reached the lowest level since May the previous day, traded midmorning at $44.10.
Among the top resources shares Anglo American [JSE:AGL] gained 1.31% to R147.57, while BHP Billiton [JSE:BIL] was 2.43% stronger on R176.66. The star performer was Anglo American Platinum [JSE:AMS] which traded 5.67% higher on R409.50.
Kumba [JSE:KIO], Africa’s biggest producer of iron ore, traded 4.06% lower despite the news that its first-half headline earnings of R3bn is 20% up on the previous year, driven by cost-cutting at its Sishen mine in South Africa. Output dropped by 21%, in line with the mine’s revised plan.
The share is still 47.6% higher over the past 30 days and 293.2% over the past six months.
Sasol [JSE:SOL] did not benefit from the higher oil price and lost 1.21% to R392.15. Sasol lost 14.92% over the past three months on concerns that the lower oil price will hurt its earnings.
There was very little support from global markets with share markets mixed ahead of the central bank meetings in the US and Japan.
The Nikkei-index in Japan dropped more than 1.5% as investors were unimpressed by a Nikkei report the government planned a direct fiscal stimulus of around ¥6trn over the next few years.
Dealers cited doubts that the Bank of Japan would offer the meaningful new stimulus the market may be hoping for when its policy meeting ends on Friday. That may trigger a market backlash.
Although markets see almost no chance of a hike by the Fed after its meeting on Wednesday, they are wary that a recent improvement in US economic data may amplify the risk of a move later in the year.
The big news on the JSE was that Anheuser-Busch InBev (AB InBev) raised its bid for SABMiller [JSE:SAB] to R1.48trn, responding to investor concerns about the deal’s structure after the UK’s vote to exit the European Union prompted a slump in sterling.
SAB shareholders will now be entitled to receive £45 a share, from £44 previously. AB InBev also increased the amount of cash for shareholders who choose a cash-and-stock alternative. This offer, which was valued at £39 a share when the acquisition was announced last year, it now worth about £51.14 a share with the increased cash.
The market did not respond much to the news. AB InBev was only 0.25% higher on R1 122.50 and SABMiller traded unchanged at R383.97. SABMiller lost more than 9% over the past 30 days, but is still 27.5% higher over the past year.
