JSE to open to recovering Asian markets as oil edges towards $100

The JSE looks set to open to mostly positive Asian markets on Wednesday, after a difficult start to the week, with focus still squarely on the escalating conflict between Russia and Ukraine.

Russia has ordered its military to “maintain peace” in separatist regions of eastern Ukraine, with the fear this is just a step towards a wider conflict that will deepen the diplomatic fallout with the West.

Russia’s status as a major producer of natural gas and oil has fuelled the fear that energy prices will rise further at a time many central banks are already trying to rein in rising inflation. Russia is also a major producer of platinum group metals (PGMs) and the largest producer of palladium.

Brent crude touched $99 a barrel before easing on Tuesday, and in morning trade on Wednesday it was trading 0.57% higher at $97.11 a barrel.

Asian markets were recovering, with the Hang Seng up 0.69% in early trade, having fallen 2.75% on Tuesday, while the Shanghai Composite was 0.55% higher, after losing 1% in the previous session.

Gold was flat at $1,899.19/oz while platinum had gained 0.5% to $1,078.50.

The rand was little changed at R15.05/$; gained 0.47% on Tuesday.

National Australia Bank head of foreign exchange strategy Ray Attrill said in a note that global currency and rates market was still displaying restrained, even perverse, reactions to the latest geopolitical developments, possibly because the sanctions announced so far fall short of the toughest available pending a deeper incursion by Russian forces into Ukraine.

Local focus on Wednesday will be on the budget speech, but analysts expect a mostly positive outcome, with the government sticking to plans for fiscal consolidation.

In corporate news, drugmaker Adcock Ingram is expected to report a rise in profits for its half year to end-December later, benefiting from a recovery in demand for over-the-counter products that suffered during the Covid-19 pandemic.

KAP Industrial also expects to report a profit rise in its six months to end-December later, saying recently that there had been strong demand for some of its products, such as timber-related items, though July’s civil unrest had its effects as well.

Private school group Curro also expects to report a rise in headline earnings of as much as 50% for its year to end-December later, with the group incurring some hefty writedowns of lower-yielding assets in the previous year.

gernetzkyk@businesslive.co.za