Market Wrap: JSE gains as weaker rand boosts miners and industrials

The JSE ended higher on Monday as the weaker rand environment supported big miners and industrial stocks, which together account for the lion’s share of the domestic share market.

The all share index, whose combined market value stands at about R22.8-trillion, gained 1% to settle at 79,770.21 points as luxury goods firm Richemont and British American Tobacco gained 1.53% and 1.27% respectively. 

The main gauge of big resource stocks gained 0.63% after the rand weakened briefly through R18/$ for the first time since early November before subsequently showing signs of stability.

However, banks, retailers and other domestically-focused shares held up on the day despite the wobbly currency that could ratchet up cost pressures for businesses via imported inflation.

Woolworths was up 4.23% to R78.93, the most since January 19 and stretched its year-to-year gains to nearly 19%, according to Infront data.

There were pockets of strength among small to medium stocks, with Thungela Resources recovering 3.3% to R219 to trim this year’s losses to 23.60% off a high base in 2022 when the stock more than quadrupled.

The JSE, which largely follows global trends, appears to have lost a bit of momentum so far in February after a flying start in January. The release of US consumer inflation figures for January could potentially determine the short-term direction for global markets.

US inflation is likely to have moderated to an annual rate of 6.2% in January, according to the Bloomberg median estimate, from 6.5% in December. Core inflation, which strips out volatile energy and food, is likely to have decelerated to 5.4% year on year from 5.7%.

“Anything that indicates inflation is still entrenched will be negative for markets as the Federal Reserve will be certain to raise interest rates further,” Greg Katzenellenbogen, a senior portfolio manager at Sanlam Private Wealth, said. “However, if we get a positive surprise, then markets will believe we have seen the peak in rates and that will be bullish for the markets.”

For its part, the Fed has been consistent in its messaging that it would continue raising interest rates until inflation returns to its 2% target range. 

Makwe Masilela, chief investment officer at Makwe Fund Managers, said markets appear “comfortable” that higher rates will be a reality for some time. “The Fed and the central banks more broadly are likely to take a gradual approach in managing inflation, unlike what we saw in 2022 when they took a stance.”

In commodity markets, Brent crude was slightly lower at $85.86 per barrel after gaining some 7% over the past five days on a rolling basis.

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