JSE to contend with mixed Asian markets on Tuesday as oil surges

The JSE looks set to contend with mixed Asian markets on Tuesday morning, with investors digesting the latest sanctions by Europe on Russia, as well as an improving Covid-19 picture in China.

Europe has moved to cut 90% of its oil imports from Russia by the end of the year, something which has sent oil back above $120 a barrel, putting additional inflationary pressure on the eurozone.

Risk assets have, however, started the week off rather positively, boosted by easing Covid-19 numbers in major Chinese cities, offering hope of a return to normality in the world’s second-largest economy.

Data showed earlier the pace of contraction in manufacturing activity in China slowed in May, while business sentiment improved.

A less worse than expected set of data has prompted a modest rally in China equities, holding the promise of an accelerating recovery in June if the virus situation remains benign, Oanda senior market analyst Jeffrey Halley said in a note.

In morning trade the Shanghai composite was up 0.75% and the Hang Seng 0.43%, while Australia’s all ordinaries index was down 0.51% and Japan’s Nikkei flat.

Tencent, which can give direction to the JSE via the Naspers stable, gained 1.71%.

Gold was 0.23% weaker at $1,851.19/oz, while platinum was little changed at $959. Brent crude was 1.21% higher at $123.21 a barrel, on track for a ninth-consecutive session of gains.

In addition to the expected EU Russian oil ban, oil prices have been supported by expectations of a China reopening, National Australia Bank currency strategist Rodrigo Catril said in a note.

Famous Brands is due to release results for its year to end-February later, expecting a doubling of headline earnings per share (heps) from continuing operations as it recovers from the worst effects of Covid-19.

Fintech group Capital Appreciation is due to release its results for the year to end-March later, expecting heps growth of as much as 35% in a recent trading update and reporting new contract wins in its software business and continued demand for cloud services.

gernetzkyk@businesslive.co.za