JSE shares positive as commodity prices surge and rand strengthens
SHARE prices on the JSE turned sharply positive last week on the back of a surge in commodity prices and a stronger rand.
The decrease in US long-term treasuries yields to less than 1.6 percent, the strong increase in the IHS Markit South Africa Purchasing Managers’ Index (PMI), the jump in the business confidence index and the suspension of ANC secretary-general Ace Magashule also contributed to the market’s strong recovery, particularly on Thursday and Friday.
The rand reached its strongest level against the dollar so far this year.
The Markit PMI improved from 50.3 points in March 2021 to 53.7 points last month as new business and output grew strongly to multi-year highs.
Customer demand is recovering and exports are improving as global markets recover from the Covid-19 pandemic.
In reaction, firms expanded their staff levels for the first time in 18 months. The business confidence index for South Africa improved sharply from 26.6 percent in February to 31.3 percent in March.
The FTSE/JSE All-share Index (Alsi) broke again through the 68 000 point level on Thursday and closed at 68 520 points on Friday. This was an increase of 2.4 percent for the week and was only 179 points off the record close of 68 699 on Friday, April 16.
The Alsi has increased by 9 111 points, or 15.3 percent, from its opening level of 59 409 points at the beginning of the year.
The strong rally in equities was led by the surge in resources. The Resources 10 Index ended the week 4.2 percent higher at a new record close for this year of 71 474 points. It has gained 24 percent in the yearto-date. Financials and property continued to recover on the back of the stronger rand, while industrials gained 1 percent during the week.
The rand recovered strongly on Thursday because of improved sentiment towards South Africa, the surge in the prices of metals, particularly gold, and the weaker dollar.
Gold rose $66 (R927) an ounce to $1 834 and platinum rose $45 an ounce to $1 253.
Against the dollar, the rand gained 44 cents last week to R14.06 on Friday, its strongest level this year. Against the pound, the currency improved 35c last week to R19.68, and against the euro, the rand also gained 35c to close at R17.09 on Friday.
In reaction to the improved domestic economic and political climate, bonds moved stronger last week.
The R186 Treasury rate fell from 7.39 percent the previous Friday to 7.27 percent.
In the US, the economy only added 266 000 new jobs last month, compared with the record employment growth of 770 000 in March. The unemployment number also disappointed, as the jobless rate increased to 6.1 percent last month, from 6 percent the previous in March.
Economists had expected a sharp increase in new jobs as the pandemic restrictions were relaxed and the Biden administration’s new stimulus package kicked in, with $1 400 being paid directly to each eligible household.
This week, Statistics SA will release the manufacturing production data for March tomorrow and the mining production numbers for April on Thursday.
Globally, analysts and investors will await the UK’S gross domestic product growth rate figure for the first quarter on Wednesday. Most developed markets will release their latest manufacturing and industrial production data.
The US will publish its inflation rate number for April on Wednesday, as well as its latest retail sales on Friday.