MARKET WRAP: JSE gains as China rate cut lifts market sentiment
The SA Reserve Bank will announce its monetary policy decision later in the week
The JSE tracked Asian markets higher on Monday as China cut its short-term funding rate, while investors remain in wait-and-see mode on the trade-war front.
According to reports, the US and China held constructive talks at the weekend as the two parties are set to seal a partial trade deal amid concerns that the almost two-year spat will have a significant effect on the global economy.
Sentiment lifted after China lowered its short-term funding rate by five basis points to 2.5% on Monday, joining the trend of monetary policy easing among developed economies in 2019.
Locally, the SA Reserve Bank is expected to announce its monetary policy decision later in the week.
“The central bank is widely expected to leave interest rates unchanged at 6.5% despite lingering fears of a credit downgrade by Moody’s Investors Service and fragile economic conditions, weighed by external risks,” said FXTM senior research analyst Lukman Otunuga.
“Should the Reserve Bank adopt a cautious stance and express concerns over the South African economy, the rand will be thrown directly into the firing line,” Otunuga said.
Investec economist Annabel Bishop said the rand could see “further gains, particularly on progress on US-Sino trade negotiations”.
“Any signs of US economic weakness that creep in are negative for [Donald] Trump’s election prospects and would likely speed the completion of the trade deal,” Bishop said.
Earlier, Eskom announced Nampak CEO Andre de Ruyter would take over as CEO of the cash-strapped power utility from January 15 2020.
At 5.25pm, the rand had weakened 0.47% to R14.7819/$, 0.64% to R16.3636/€ and 0.7% to R19.1494/£. The euro firmed 0.17% to $1,107.
The R2030 government bond was weaker with the yield rising 4.5 basis points to 9.12%. Bond yields move inversely to their prices.
Gold was up 0.21% to $1,471.06/oz and platinum 0.41% to $894.57. Brent crude lost 1.32% to $62.60 a barrel.
The Dow was flat at 27,988.92 points, with the FTSE 100 also little changed. France’s CAC 40 was down 0.55% and Germany’s DAX 0.68%.
Earlier, the Shanghai Composite rose 0.62%, Hong Kong’s Hang Seng 1.35% and Japan’s Nikkei 225 0.49%.
The JSE all share gained 0.74% to 56,467 points and the top 40 0.82%. Industrials rose 1.36% and platinum miners 1.59%.
Barloworld fell 0.31% to R123.62. The industrial company said it would merge its automotive and logistics businesses to save costs.
Netcare rose 5.16% to R18.55, despite the company saying on Monday that profit fell 47.8% to R2.4bn in the year to end-September.
Pioneer Foods fell 0.89% to R108.03. The company declared a dividend of R3.24 in the year to end-September, down 11% from the previous period.
Astral Foods rose 1.48% to R174.54 after earlier reporting revenue increased 4% to R13.4bn in the year to end-September.
Data specialist PBG Group said on Monday that it expects headline earnings per share (HEPS) to be between 15.7c and 16.7c in the six months to end-September from a restated 3.04c in the previous period. Its share price rose 5.42% to R1.75.
Capital & Counties lost 0.28% to R50.05. The property investor said on Monday that it is selling its residential interest in Earls Court in London for £425m.
Capital Appreciation fell 3.75% to 77c. It said on Monday that its HEPS fell 16.3% to 3.81c in the six months to end-September.
Foreigners were net sellers of R2.8bn of equities and net sellers of R5.7bn of bonds in the week ended November 15, according to JSE market statistics.