MARKET WRAP: JSE gains on renewed risk-on trade

The JSE closed higher on Thursday on a positive opening on the Dow and as German stocks surged for a second consecutive day.

The Dow was 0.58% higher at the JSE’s close and the DAX 30 had risen 1.87%.

Platinum and gold stocks led the gains by the close, with banks and financials firming on a marginally weaker rand. Worse-than-expected producer price inflation, released earlier in the day, had little effect on sentiment, despite the likelihood that it would lead to higher consumer inflation and a more hawkish stance from the Reserve Bank.

Shares in European vehicle makers were among the top performers after European Commission president Jean-Claude Juncker and US President Donald Trump said they had agreed to work towards “zero tariffs” and “zero subsidies on non-automotive industrial goods”.

Trump had threatened to impose tariffs on European vehicles, but said he’ll hold off on any retaliation as long as discussions continue, Dow Jones Newswires reported.

The potential for a reprieve in trade tension added to momentum on Wall Street during what is shaping up to be a strong corporate-earnings season, despite Facebook’s disappointing numbers, the newswire said.

European markets were also supported by comments by European Central Bank (ECB) president Mario Draghi that the bank would follow a measured approach towards hiking interest rates next year. This did not differ much from previous comments, with Draghi emphasising trade risks still remained “prominent”.

The ECB indicated in June that it would wind down asset purchases by the end of this year and suggested that rate hikes wouldn’t take place until late in 2019. The euro weakened in response, trading at $1.1662 from $1.1728 soon after the JSE’s close.

The all share closed 0.63% higher at 56,743.3 points and the top 40 added 0.76%. The gold index rose 2.19%, platinums 1.85%, food and drug retailers 1.31%, banks 1.15% and industrials 0.95%. Disappointing interim results from UK property group Intu contributed to a 0.72% drop in the property index.

After firming to R13.0956 to the dollar in intra-day trade, the rand drifted weaker towards the JSE’s close, when it traded at R13.2203.

Local bonds showed limited reaction to the producer inflation data, with the R186 bid at 8.62% from 8.61%. The US 10-year treasury was last seen at 2.9602% from 2.976%.

The top 40 Alsi futures index gained 1.12% to 50,840 points. The number of contracts traded was 14,258 from Wednesday’s 16,577.