MARKET WRAP: Rand holds on to gains while JSE gets a lift from precious metals stocks
The JSE and rand were firmer on Wednesday as markets continued to wind down ahead of the Christmas long weekend.
The local currency held on to its gains of the past two days which came after President Cyril Ramaphosa emerged victorious in the battle to lead the ANC for a further five-year term.
The JSE was given a leg-up by precious metals and mining stocks which benefited from the stronger gold price, which has stayed firmly above the $1,800/oz level, and the firm platinum price.
At 5.20pm the rand had gained 0.64% to R17.2023/$, 0.68% to R18.2515/€ and 1.22% to R20.8229.
SA faces significant headwinds from load-shedding, tightening financing conditions, high unemployment and softening global growth, which increasingly take a toll on the economy, Sasfin said in a note on its website.
“The leading indicator (and similar economic data) are thus expected to continue weakening through the months ahead and may eventually add pressure on the Reserve Bank to turn more growth-supportive once inflationary pressures ease,” Sasfin analysts said.
However, that may not translate into sustained rand weakness. The inflationary tide is changing globally as recessionary forces mount, meaning major central banks such as the US Federal Reserve may also need to turn more supportive sometime next year, they added.
“This is expected to weigh especially heavily on the dollar given its glaring overvaluation and need to correct lower. The medium-term outlook for the rand thus remains bullish, even if the local unit struggles to break out of a consolidatory gear in the more immediate short term.”
The JSE all-share index ended up 1.09% at 73,837 points, with the top 40 rising 1.12%, helped by a 2.35% jump in the precious metals and mining index, a 2.44% advance in resources and 2.42% rise in the industrial metals and mining index. Banks and financials were up 0.65% and 0.81% respectively.
Gold strengthened to $1,825/oz before paring gains to trade at $1,819.15/oz by 5.20pm as the dollar continued to fall, with Tuesday’s strength in the Japanese yen after central bank chair Kuroda’s intervention weighing on the greenback.
“The dollar has now fallen about 9% over the past two months, supporting gold prices which have risen from lows close to $1,635/oz in October,” SP Angel said in a research note.
The yen touched a four-month high of 130.58/$ on Tuesday, when it jumped 3.8% in its biggest one-day rise since 1998. The surge was a sign that traders expect the Bank of Japan to further tighten monetary policy in coming meetings, Reuters reported.
Platinum miners were a feature on Wednesday, buoyed by the stronger metals prices, with the spot price rising 1.18% to $1,008.75/oz. Impala Platinum was up 3.91%, Northam 3.85% and Amplats 2.66%. Among gold stocks, Sibanye jumped 3.33% and DRDGold 3.56%.
While global and local market moves may be worsened by lower liquidity as the holiday season approaches, there is still plenty of economic data for investors to focus on this week, including US GDP, initial jobless claims and core inflation that will likely determine the future course of interest rate hikes by the Fed.
Major global stock markets were also firmer with the Dow Jones industrial average up 1.26% at 5.35pm. London’s FTSE100 was 1.33% higher, France’s CAC added 1.59% while Germany’s Dax firmed 1.2%.
Brent crude was 2% higher at $81.64 a barrel.
Source: businesslive.co.za