JSE gains on better emerging market sentiment

While a handful of emerging markets remained mired in recession, China had been stable

THE JSE closed firmer on Friday in global riskon trade following a sharp rise in oil prices. The all share was flat for most of the day as the market looked for direction, which came in the late afternoon on stronger European markets and a firmer opening on Wall Street.

By the JSE’s close the price of Brent crude was up 5.44% at $41.74 a barrel, its highest level since mid-March.

Investor sentiment swung back in favour of riskier assets, buoyed by rising oil prices, a weaker Japanese yen and reassurances from US Federal Reserve chairwoman Janet Yellen about the strength of the US economy, Dow Jones Newswires reported.

Comments from Japanese Finance Minister Taro Aso that he may act against “one-sided” yen increases helped push down the value of the yen against the dollar after it surged on Thursday, raising concerns about the effectiveness of central bank policies and, by extension, global growth prospects.

In a speech late on Thursday, Ms Yellen said the US economy was “on a solid course” and was “not a bubble economy”. That helped push up oil prices, which in turn bolstered investors’ risk appetite, analysts said.

She was further supported by US Federal open market committee members on Friday who in public reaffirmed the “cautious” stance expressed after last month’s Fed meeting, in which rates were kept unchanged.

The JSE all share closed 0.54% higher at 51,424.50 points and the blue-chip top 40 rose 0.51%. Banks gained 2.85% and financials firmed 1.33%. Platinums were 1.31% higher and resources added 1.02%. South African listed property was up 0.53%, while the gold index lost 1.81%.

The all share ended the week down 0.31%, its third consecutive week of losses. It is up a marginal 1.44% for the year. The Dow Jones industrial average was 0.80% firmer soon after its opening, while at the same time the FTSE 100 was up 1.11%, the Paris CAC had gained 1.50% and Germany’s Dax was 1.20% higher.

The JSE also benefited from improved sentiment towards emerging markets. Capital Economics economist Neil Shearing said the sense of crisis that had been building had started to ease over the past month. While a handful of emerging markets, such as Brazil and Russia, remained mired in recession, China had been stable. “There is no evidence of the hard landing that many fear,” he said.

The rand was firmer against the dollar in late Friday trade on the increase in oil prices. The rand was also buoyed by better than expected local manufacturing output data released on Thursday. Growth in the sector increased by an annual 1.9% in February, its strongest showing since July 2015. At 5.38pm‚ the rand was trading at R14.9744 to the dollar from R15.2632 at Thursday’s close.

Bonds were firmer late on Friday on the positive global sentiment and following the issuance by the South African government of a $1.25bn 10-year bond in the international capital market. The firmer rand also supported the bond market. At 5.40pm‚ the benchmark R186 bond was bid at 9.190% and offered at 9.180% from Thursday’s close of 9.255%.

South African futures were higher in late trade, taking their cue from a positive close on the JSE and stronger global markets.

At 5.44pm (CAT), the local near-dated Alsi futures market was up 0.51% at 45,748 points. A total of 26,497 contracts traded from 30,662 previously.