MARKET WRAP: Pressure on the oil price helps fuel JSE’s broad-based gains

The JSE rose on Wednesday, recording broad-based gains, with banks faring best as the rand firmed against the dollar.

The all share rose 0.65% to 51,551.9 points and the top 40 0.69%. Banks added 2.49% and gold miners 2.04%.

The dollar was under some pressure as the euro found support from developments around the Italian budget, and due to recent falls in the oil price.

Brent crude was staging a recovery on Wednesday afternoon, but has come under strain recently due to signs of slowing global growth, as well as rapidly rising production in the US. Analysts are also wary that the recent production cuts from oil cartel Opec could stabilise the market.

A falling oil price was weighing on US stocks, said BK Asset Management MD Boris Schlossberg. With crude at its current levels, “most of the frackers are now underwater in their business models and, given the combination of falling prices and higher credit costs, the squeeze could prove to be especially harmful to one of the most capital-intensive sectors of the US economy”.

Market focus is squarely on the US Federal Reserve monetary policy decision at 9pm local time, with consensus almost unanimous that the Fed will raise rates for the fourth time this year, with 91 of 92 experts polled by Bloomberg expecting an increase.

The Fed’s outlook will be scrutinised, however, amid concern that there will be a synchronised global economic slowdown in 2019.  As fears about the health of the global economy grow, the markets simply don’t think the US economy can handle higher rates, said London Capital Group head of research, Jasper Lawler.

“Traders will be watching for dovish signs, such as dropping the phrase, ‘further gradual rate rises’ from the statement, and a softening of the dot plot from three hikes to, at most, two [in 2019],” he said.

Standard Bank added 3.98% to R177.60, Absa 3.31% to R159.31, and Nedbank 3.03% to R267.44.

Mr Price added 2.66% to R237.

Vodacom gained 5.42% to R130.62.

Rand hedge British American Tobacco fell 2.21% to R460.50 and Richemont 1.17% to R90.30.

Taste Holdings slipped 6.25% to 15c after it announced yet another rights issue, hoping to raise R132m by getting its investors to subscribe for 146 rights offer shares at 10c each for every 100 shares they hold.

Shortly after the JSE closed the Dow was up 0.88% to 23,675.64 points, while in Europe the FTSE 100 had gained 0.96%, the CAC 40 0.54% and the DAX 30 0.51%.

At the same time, gold was up 0.58% to $1,256.61 an ounce and platinum 0.52% to $796.01. Brent crude had climbed 1.86% to $57.03 a barrel.

gernetzkyk@businesslive.co.za