MARKET WRAP: Rand hedges lift the JSE as rand weakens past R14.50/$

A strong performance by rand hedges helped to lift the JSE on Thursday, as global equity markets recovered a little from a hawkish US Federal Reserve policy statement, which weighed on them on Wednesday.

The Fed cut interest rates by 25 basis points as expected, although Fed chair Jerome Powell played down the chances of further cuts, souring the mood on global markets.

The dollar has rallied as a result of Powell’s comments, with the rand 1.41% weaker at R14.5372/$ as the JSE closed on Thursday. The Dow suffered its worst loss in two months on Wednesday, but was bouncing back on Thursday as SA markets closed, helping the local bourse reverse earlier losses.

Focus is now on US economic data, although upbeat economic news was likely to be negative for stock markets as investors try to price in the chances of another Fed cut, said FXTM chief market strategist Hussein Sayed. “It seems we’re returning to an era where good news is bad news to equities.”

A positive performance from some major counters, notably rand hedges, lifted the JSE the most, while platinums slumped as the price of the precious metal fell.

The all share gained 0.77% to 57,223.6 points and the top 40 1.05%. Industrials added 2.44% and gold miners 1.31%. Platinums fell 3.08% and resources 1.48%.

British American Tobacco jumped 8.66% to R556.79. The cigarette giant said earlier that revenue grew 4.6% in the six months to end-June, and with a range of new products on the way, it expected further acceleration in the second-half of 2019.

Naspers jumped 3.87% to R3,643, tracking gains in Hong Kong-listed Tencent, of which it holds a sizeable chunk. Tencent has been boosted by news this week that it will work with Qualcomm — the world's largest manufacturer of chips for Android phones — in creating a new gaming phone.

AB InBev gained 2.98% to R1,482.78.

Shortly after the JSE closed gold was up 0.23% to $1,415/oz while platinum had slipped 1.98% to $847.60. Brent crude was 0.65% lower at $63.76 a barrel.

The Dow had risen 1.07% to 27,151.01 points, while in Europe the FTSE 100 had fallen 0.17%; the CAC 40 was up 0.34% and the DAX 30 0.12%.

Local news was positive, with the seasonally adjusted Absa purchasing managers index (PMI) rising to 52.1 index points in July from 46.2 in June. This is a three-year high for the gauge of factory activity, as well as being the first time in 2019 it has risen above 50 points. A reading of 50 or higher indicates expansion in the sector. The improvement in activity may not be sustainable, however, said Investec economist Kamilla Kaplan in a note. Activity was likely to be constrained by weak export prospects, and subdued local demand.

Mondi fell 3.35% to R301.52, despite it saying earlier pre-tax profit for the half-year to end-June rose 29% from the prior period, with the paper and packaging group raising its dividend 27% to 27.28 euro cents.

Sappi slumped 14.66% to R44.53. It said earlier profit for the quarter to end-June fell 84% from the prior quarter, and headline earnings per share 78%, as it battled challenging market conditions.

gernetzkyk@businesslive.co.za